What is your financial advisor’s fiduciary responsibility?

When choosing a financial advisor to manage your most precious assets, it is essential to determine if the financial advisor will accept fiduciary responsibility and to what degree. Most plan sponsors are quite busy with the daily business of managing their company, and do not have time for the extra diversion of becoming proficient with the regulations and many details of offering a 401(k) plan to their employees. Considering the implications of the fiduciary responsibility that will otherwise default to you, unless you are well versed in retirement plans, IRS Code, ERISA regulations, and investment strategies for the range of your employees’ financial needs, you’ll want to have a 3(21) investment advisor sharing partial fiduciary responsibility with you, or a 3(38) investment advisor taking the full burden off your shoulders. Finding the right financial advisor for your company’s plan is very important! When you’re interviewing a financial advisor, you should find out if the advisor’s company will accept the legal responsibility and become a fiduciary for your plan, and whether as a 3(21) or a 3(38). In addition, you should expect your financial advisor to access resources that help meet IRS compliance; inquiring about the nature of these resources will help you decide if your company will be sufficiently represented when compliance issues arise. Considering that your company may have a 401(k) committee, it would be wise to inquire if the financial advisor is capable and willing to offer training, education and support to your committee. Also important is asking about potential conflicts of interest that might occur between the financial advisor and money managers with whom the financial...

2014 Retirement Plan Limits

Though the New Year is just around the corner, there is still plenty of time to make contributions to your retirement plan. Here are the applicable limits for 2014:   2014 401(k) Limits   401(k) elective deferrals $17,500 Annual defined contribution limit $52,000 Annual compensation limit $260,000 Catch-up contribution limit $5,500 Highly compensated employees $115,000   2014 Non-401(k) Limits   403(b)/457 elective deferrals $17,500 SIMPLE employee deferrals $12,000 SIMPLE catch-up deferrals $2,500 SEP minimum compensation $550 SEP annual compensation limit $260,000 Social security wage base $117,000     Have a question about your 2014 retirement plan contributions or limits? Need help setting up a plan before year end? Synergetic Finance can help. Contact us today to set up a complimentary...

401(k) Plan Alternatives for Large Companies

In our last post, we talked about 401(k) plan alternatives for small companies. Here we’ll discuss retirement plan options for larger companies. Except for the Keogh plan, larger companies can adopt all of the plans available to smaller companies, but there are nine additional options: Profit Sharing Plan: Employees receive a percentage of the company’s profits based on quarterly or annual earnings. Money Purchase Pension Plan: The company makes annual contributions to the employees’ pension accounts that are not related to the company’s profits. Age-weighted Profit-sharing Plan: This plan allows employers to make retirement contributions based on an employee’s age as well as their salary. New Comparability Plan: A new comparability plan creates classes of employees in a company, and permits the employer to maximize contributions for selected employees. Thrift/Savings Plan: A TSP is a retirement savings plan for employees and retirees of the federal government, in addition to members of uniformed service organizations such as the military, police, firefighters, EMTs and paramedics. Defined Benefit Plan: Employers can also establish a pension plan in which the employer deposits a specified monthly amount. Target Benefit Plan: With a plan of this type, contributions are based on retirement benefit projections; results are tied to the performance of the investments and are not guaranteed. Cash Balance Plan: The employer makes annual contributions to each individual’s account, and on retirement, the originally defined dollar amount is available to the retiree. The monetary value in the account may increase or diminish over the years, with the risk being borne by the employer. Employee’s Stock Ownership Plan (ESOP): This plan is for companies owned by...

401(k) Plan Alternatives for Small Companies

For many companies, 401(k) plans are a good choice, providing the right amount of options and opportunities for a company and its employees. There are alternatives, however. In this post, we’ll share the options available to small companies. Payroll Deduction IRA Plan: Employees establish either a traditional or Roth IRA with the financial institution of their choice, and then authorize a specific payroll deduction to fund their account. Simplified Employee Pension (SEP) Plan: Employers contribute a set monthly amount to their employees’ traditional IRA accounts. SIMPLE IRA Plan: SIMPLE is an acronym for Savings Incentive Match Plan for Employees. This plan allows both employees and employers to contribute funds to their employees’ traditional IRA accounts. SIMPLE 401(k) Plan: Similar to the SIMPLE IRA plan, the SIMPLE 401(k) plan allows an employee to defer some compensation, however the employer must also make a matching and legally prescribed contribution. Keogh Plan: A Keogh plan is a qualified tax-deferred pension plan specifically for a self-employed person or a partnership. Because of the complexities and ramifications involved in selecting and implementing a retirement plan, we recommend that you work with an experienced financial planner or wealth manager like Synergetic Finance. Please contact us with your questions or to set up a complimentary consultation to discuss your company’s retirement planning needs and goals. Coming soon: Author Joseph M. Maas of Synergetic Finance will be releasing his next book in the Insight series: 401(k) Insight: Getting to...