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Facts on Sponsoring a 401(k) Plan

Help your employees invest for retirement

Decision-Makers: Need Help?

You’ve come to the right place!

Making the decision to sponsor a retirement plan without professional assistance is like starting a hike without a map. If you’re new to the landscape, let us share with you how we see initial plan design as key to participant success and how plan-design planning can ease administrative burdens for the business.

At Cardinal Retirement Planning, Inc. we believe your business is unique, and your 401(k) plan should match!

Avoid Payroll Headaches

Payroll integration is one of the most important considerations when establishing a retirement plan. Whether or not your business is one of the millions using ADP as your payroll provider, we can help you find the right match.

  • Our implementation partners at Ascensus, Lincoln, and Newport Group provide excellent service and support on an open architecture platform, allowing for a wider selection of investment funds and stable value funds.
  • We can design plans and models using Vanguard funds, which offer low-cost and diversified investments.

On this page we’ve put together some resources you might find helpful while on your 401(k) plan and retirement plan journey. Scroll down for an outline of the general steps necessary to form a plan, as well as a comparison of different types of 401(k) plans.

Offering Retirement Benefits like 401(k) Plans Helps Employers

In today’s labor market we believe 401(k) benefits should be viewed by employers as an employee perk rather than a cost. Retain and attract talent with the help of Cardinal Retirement Planning.

 

  • 92% of employees at small- to mid-sized companies ranked “workplace savings and retirement plans” as an important factor in remaining with their employer, according to a 2012 Environs Research Group study.
  • 75% of new hires at a company offering 401(k) plans say that a retirement plan provides a compelling reason to stay, according to a Willis Tower Watson study.
  • 87% of millennials are interested in retirement planning benefits, and 84% would like retirement coaching benefits, according to an Accenture survey.
  • According to a survey by JP Morgan, many small business owners who currently do not offer a 401(k) plan expect to offer one within the next 12 months. Don’t fall behind, join the many businesses who are seeking to attract and retain talent by offering retirement benefits!
  • Aside from helping to attract and retain talent in today’s labor market, 401(k) plans can also have favorable tax benefits for employers who offer them! Speak with a professional to discuss these potential tax savings when offering a 401(k) plan.

What steps do I need to take?

  1. Adopt a written plan. Using an approved “prototype plan” can help you stay out of trouble with the IRS, but comparing these plans against one another can be difficult and complex.
  2. Arrange for the Plan’s assets. Depending on the type of plan, a trust needs to be established, or a retirement account must be created. A lot of legal and compliance knowledge is necessary to do this step correctly and timely.
  3. Get a recordkeeping system in place. The Plan has a duty to document and record investment elections and participant information. It is usually much simpler to outsource this step, but finding the right recordkeeper poses a challenge to most decision-makers.
  4. Provide plan information to participants. The Plan has a requirement to notify all eligible employees about the new 401(k) plan and provide enrollment information.

These steps are easier said than done! They are also missing the ongoing participant education aspect that Cardinal believes is incredibly important to any good plan. Plan education can help increase enrollment and contribution levels, helping employees build their nest egg. We recommend having a professional help you review options when it comes to meeting the retirement needs of your employees.

What type of plan is right?

If you are overwhelmed with the 401(k) plan and retirement plan information out there — you are not alone! There is a lot that goes into a good retirement plan, but most people do not realize how many different types of retirement plans are out there. We understand that retirement benefits are not a one-size-fits-all approach. Let’s take a quick look at a few of the types of 401(k) plans.

  • A traditional 401(k) plan is considered the most flexible of all the plans. Employers can make contributions, or match deferrals, or both, and all of these contributions can be subject to a vesting schedule. It also allows for pre-tax contributions through payroll deductions. This payroll deduction option is one of the reasons we mentioned making sure you find a platform that easily integrates with your payroll provider!
  • A safe harbor 401(k) plan is very similar to the traditional. One big difference is that employer contributions have to be fully vested once they are made. There are other tax rule differences between the safe harbor 401(k) plan and the traditional 401(k) plan.
  • An automatic enrollment 401(k) plan is one where the deductions from payroll are made automatically, and the employee would have to opt out rather than opt in. Check out this study by Vanguard highlighting the power of automatic enrollment and how it benefits both employees and employers.

Choosing the right plan and partners from the start can help your business succeed by attracting and retaining employee talent. We feel strongly that pairing a retirement plan like a 401(k) plan with ongoing participant education improves retirement outcomes.

Check out these links for details on the surveys mentioned above and more information on how important retirement benefits are for employees:

Real People, Advice, and Education.

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