401k Plan Fees

I recently read about the U.S Department of Labor’s audit of 401k plans. Why are such audits conducted and do they make any difference to my small business’s 401k plan-? Susan J. Lin, Windom, MN 56101, runs a dress designing outfit from home.

The U.S Labor department audits 401k plans to make sure that they are being operated in such a way that the participants are really benefitted. These audits do help 401k participants or employers like you who offer these plans in their small business for their employees. That’s because audits make sure the 401k plans offered by various providers are in line with certain standards that are designed with the participant’s needs in mind.

One very significant way in which an audit can help you is that it eliminates the incorporation of hidden fees into the plans. Many providers include such costs in the plan but do not disclose these in clear terms when the plan is established. As a result the participants may end up paying several hundreds of dollars through the plan’s life without even knowing it. The participant’s saving potential is reduced to this extent. An audit of the 401k plan reveals these costs and helps make employees and employers like you aware of the potential hidden fees that you may be paying for the plan.

If you would like to have more control over your 401k plan and keep the costs to the minimum possible you could opt for a 401K DIY suite like the one offered by http://smallbusiness401k.com/. Such suites let you establish the plan by yourself, manage it with ease and carry out monthly updations without depending on external help. Getting familiar with such plans is not a challenging task at all because these are designed to be user friendly. Once you have familiarized yourself with the way the software works, it should take you just a few minutes each month to have your records up to date.

401k Fees and Charges to Beware of

My interior decoration business has 5 employees, some of them working from home. I want a 401k software package that can help me set up a 401k plan for my business from which I can take a loan when I want to expand. Do all 401k plans charge the same fees for loans? If not, what should I consider reasonable? Alison Lumpkin, Witts Springs, AR 

Unfortunately, a number of small business owners fail to ask this very important question before they sign up for a 401k plan. Before you start shopping for your plan, you should know that there are some plans that come with fees and charges that are not really reasonable at all when you want to take a loan.

A good thumb rule is to avoid a plan that charges a percentage of your loan on an annual basis. When you decide to dip into your 401k account, chances are you already have a large enough financial need. If it is business expansion for which you will need your 401k funds, chances are the bill is likely to be quite high. You definitely do not want to be paying huge fees under either of these circumstances. A 401k plan like http://smallbusiness401k.com/ that has the same fixed dollar charge for a loan of any size is a better choice. Simply make an estimate of how much you will need as your loan and compare the percentage charges with the fixed charges. You will see which one makes more sense straight away.

Lock-ups are another aspect you should beware of when you are opening your 401k account. Some plans, especially those offered by insurance companies, often have lock-up periods preventing you from taking your funds out until a specific time has passed. Until then, you are stuck with a plan that does not let you take affordable loans. If you do take the loan in spite of the high charges you are committing yourself to paying the annual fee until the lock-up period expires.

Nondiscrimination Testing with 401k Plans

I want to set up a 401k plan for my auto parts shop. Do I need to ensure that it complies with the nondiscrimination regulations year after year? Michael P. Ladd, Oklahoma City, OK 

A 401k plan is a retirement benefit plan that was created with the intent of allowing employees to save in an effective manner for their future. The many benefits and tax advantages offered with these plans are all established in line with this objective. This is also the reason why the government insists that these plans are offered to all employees irrespective of their position within your business or the total compensation they earn.

To get all the tax benefits that a 401k plan offers to participants, it should give benefits to all employees, including the rank and file staff. A plan that only benefits the business owner or top level management fails to pass theIRS’s non discrimination test. This test compares the plan’s participation as well as contributions made by rank and file employees with those of top level employees and the owner/ management.

Annual testing is mandatory for all regular/ traditional 401k plans to verify that they are non discriminatory. Through this testing it is verified whether the contributions made on behalf of rank and file employees is in proportion with that made for the top brass of your business.

If you want to avoid getting into the testing and verification loop then aSafeHarbor401k is the right 401k plan for your business.SafeHarborplans are exempt from the annual non discrimination testing that is required for the other 401k types. This plan has some inbuilt features that ensures that all employees are given equitable treatment when it comes to contributions.

Talk to an investment advisor to know more about Safe Harbor 401ks and the advantages they offer for your business. If you will be using a DIY 401k package like http://401keasyonline.com/, you can browse through their website or ask their support staff for help on setting up and managing aSafeHarbor plan.

401K Fees Charged by Investment Advisors

How do I find out if I am paying my registered investment advisor too much for my small business 401K plan?- Alicia Spencer, Florida– Owns a furniture refurbishing shop.

A few years back, a 401K plan was quite an expensive plan to maintain from the employer’s perspective. There were not many choices, though, so both small business owners and their employees resigned themselves to paying some hefty charges to plan administrators/ managers and investment advisors etc, in exchange for the peace of mind afforded by a safe tax advantaged retirement plan like 401K. But today, with many feature rich software suites like http://smallbusiness401k.com offering complete 401K plan set up and administration tools at budget prices, this scenario has changed completely.

If you have a 401K plan for your small business set up through your registered investment advisor then you need to make sure that you are not paying far more than you have to. After all, you can simply switch to an online software suite with relative ease and save money. If you choose one with a host of investment options then you simply eliminate the need for an advisor. Here are a few points to consider that help you determine if your advisor is fleecing you.

The important thing is to know how the advisor is paid. If you pay him a percentage of assets held in the 401K, then you may want to shift to a fixed fee instead. This way, if your investment does well, your advisor will not be making money off your investment acumen.

Get a written statement from the advisor that he does not receive payment from the administrator of your plan so that you avoid paying him twice for the same 401K. Ask him to fill out a Department of labor 401K disclosure form that specifically asks for details of various possible fees and charges. This form will show you exactly what charges are being paid to your advisor. An advisor who does not want to fill this form is probably fleecing you with too many hidden fees.

401k Plan Fees

What kind of costs do I have to incur when I want to set up a 401K plan for my employees? William McDougherty, Ohio, runs a computer service outfit with a partner and plans on employing more staff.

Setting up a 401K plan was a complex affair that also involved some significant expense back in days before the internet changed the world as we know it. Today, having your small business 401K launched and fully functional takes just a few hours at most and hardly sets your business back in financial terms. The fact that these let you track and update your employee plan periodically gives you and your employees a great deal of control over the 401K and also keeps costs low.

There are many efficient 401K suites offered online that take the bite out of the complicated set up and administration process that many business owners still associate with this retirement plan. One good example would be the http://runityourself401k.com. This 401K tool lets you create your own plan at a price that is advertised as the lowest in the market. A 25 participant plan costs less than $1400 per year when you set up your 401K with this tool.

Some of the fees and charges that you may incur include a one time set up fee, administration charges, investment management fees, expenses pertaining to mutual fund investments and 12-b fees. There are some plans that can set you back by as much as 2% of your plan’s assets each year, although internet tools are generally quite affordable. It is a sound idea to compare prices of various 401K options before you finalize on one. During this comparison, remember to take the total cost of the plan into consideration rather than comparing specific fees and charges. Some of the fees may not be very apparent at first glance so asking the 401K provider some specific questions about overall plan costs is definitely a good first step to take.