Corporate 401(k) Plans

The financial advidors at Rollins have decades of experience helping companies small and large establish a variety of 401(K) plans to benefit both employees and the firms themselves.

401(k) plans are retirement plans offered by a company to its employees. The employee may choose between taking compensation in cash or deferring some percentage of their earnings to the 401(k) account. Generally, the deferred funds are not taxable until they are distributed.  Rollins Financial Advisors can guide you to the 401(k) plan that fits the size and goals of your company.

A good 401(k) plan is an essential part of an attractive benefits package for prospective employees. It can help your business find and retain the talent you need to succeed. This is especially true for small businesses competing with larger firms for candidates. 401(k)s also provide significant tax advantages to help your bottom line, as employer contributions are tax-deductible.

If your company has one or more employees, setting up a 401(k) option for your workforce may be a mutually beneficial solution. We’ll look at the specific needs and goals of your company to help you determine whether a 401(k) plan is the right option for your company and guide you through the process of setting up investment options within that plan for your employees.

401(k)s can be a powerful savings tool for individuals, allowing employees to compound their retirement saving through employer matches and reap the benefits of tax deferment until retirement. Workers should always utilize their tax-advantaged savings options such as IRAs and 401(k)s first when saving for retirement. Far too many people miss out on financial benefits available to them through these accounts.

The Employee Retirement Income Security Act of 1974 established the framework for modern employer-provided retirement accounts. Qualifying plans can be structured as defined-contribution or defined-benefit. 401(k)s are defined-contribution plans. The amount of money in the account will be determined by the participant’s contributions and the performance of the investments in the account. Employers are typically not required to make contributions to the plan, in contrast to a defined-benefit plan such as a pension, though many employers choose to for a variety of reasons.

High earners may be limited in their ability to participate in tax-advantaged accounts like a 401(k) or an IRA:

The basic employee compensation limit for 2019 to a 401(k) is $19,000, with a catch-up allowance of $6000 annually if you’re over 50. The IRS employs a Highly Compensated Earner designation which may inhibit your ability to participate in a 401(k) fully. 

Roth IRAs limit your annual contribution to $6000 or $7000 for participants over the age of 50. For 2019, the income phaseout range for taxpayers making contributions to a Roth IRA is $122,000 to $137,000 for individuals and heads of household or a married couple filing jointly earning $193,000 to $203,000.  Rollins Financial Advisors can walk you through your options.

In contrast to IRAs, investment options within a 401(k) or 403(b) plan are often more limited. Most plans offer a variety of mutual funds and ETFs to choose from. Mutual funds are collections of investment types such as stocks, bonds, and ETFs rolled into one package. This is convenient for individual investors because mutual fund managers are responsible for the selection of the various fund assets. The team at Rollins Financial Advisors carefully screens all available funds to identify high-quality and low-cost 401(k) options for your plan.

Distribution rules for 401(k) and 403(b) plans differ from those that apply to IRAs. IRA distributions can be made at any time, but 401(k) and 403(b) assets can only be withdrawn when a triggering event occurs. These triggering events include the employee’s separation of service from the employer by retirement, termination, or death, the employee reaching the age of 59 1/2, or the termination of the plan. Additionally, some plans spell out conditions which allow employees to make hardship withdrawals which would otherwise not be allowed.

401(k) plans contain strong disincentives to early withdrawal of funds. There are exceptions for contingencies such as court-ordered dispersal and medical hardship, but early withdrawal usually means that the money is counted as ordinary income and assessed a 10% early dispersal fee. Early withdrawal should be seen as a financial last resort.

Participants may be able to directly transfer 401(k) or 403(b) funds into another qualified account in response to changes in their employment or life situation. These rollovers are often possible without penalty if the funds are moving into a new employer’s  401(k) or 403(b), an IRA, or a self-employed pension plan.

Employees are eligible to take lump sum distributions of their accounts upon termination of a job. If they do so prior to their legal retirement age, however, their employer is required to withhold 20% of the funds. Rollover into a qualifying account eliminates this requirement.

They availability of penalty-free rollovers and hardship withdrawals, particularly in the early days of 401(k)s and 403(b)s, eased employee fears about tying up their money for decades in retirement accounts. These employer-sponsored accounts have become the most popular means for American workers to save for retirement. 

Required minimum distributions from 401(k) plans begin at age 70 ½ except in cases where the participant is still employed and the plan allows deferral until retirement. It is possible to roll over IRAs and 401(k)s from previous employers into the account where the participant is still working in order to avoid required minimum distributions, however.

Roth 401(k) plans have been an option for companies since tax law changed in  2006. They have become a popular benefit for younger workers, currently in lower tax brackets with the expectation of being in a much higher tax bracket upon retirement.

Rollins Financial Advisors knows how important it is for companies to provide for their employees’ retirement security, both to do the right thing and to keep you competitive. We also know how important it is to provide benefits in a cost-effective manner. We can help you set up a 401(k) plan that fits your company’s needs.