The Frugal Fiduciary Blog

Roth 401k Deferrals — Answers to Common Questions

Posted by Eric Droblyen on Jan 25, 2017

In a 2016 401k plan design study of 2,767 small businesses, we found 66% permit participants to make after-tax Roth deferrals to their personal account. I think it’s safe to assume the high adoption rate of this 401k plan feature is due to participant demand.

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Topics: Roth 401k, Retirement Planning, Plan Design

Our Top 10 401k Blogs of 2016: What Topics Were the Most Popular?

Posted by Eric Droblyen on Dec 28, 2016

Happy Holidays from the Frugal Fiduciary! As 2016 comes to a close, we looked back through this year’s blogs to find the most read.  It turns out our most popular blogs related to the following topics:

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Topics: Retirement Plan Types, Fiduciary Responsibiilty, Safe Harbor 401k, 401k fees, Plan Design, 401k Studies

401k Eligibility: When to Let Employees Join Your 401k Plan

Posted by Eric Droblyen on Dec 14, 2016

During the 401k plan design process, we get a lot of questions from small business 401k fiduciaries about employee eligibility.  They want to know when they should let new employees into their 401k plan and their options for keeping certain employees – generally the ones that won’t participate – out.

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Topics: Plan Design, 401k Studies

401k Plan Design Study: What 2,767 Small Business 401k Plans Are Doing

Posted by Eric Droblyen on Nov 30, 2016

Small businesses can have dramatically different goals for their 401k plan. While some want to maximize key employee contributions, others want to incentivize rank-and-file contributions.  401k fiduciaries have nearly endless options for meeting these goals – many with very different expenses. The process of matching 401k goals to available options is called 401k plan design.

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Topics: Plan Design, 401k Studies

The Myth of the 15 Minute 401k Plan Setup

Posted by Eric Droblyen on Jul 13, 2016

Over the past year, several new Internet-based 401k providers have launched in the small business retirement plan market. Led by tech entrepreneurs instead of industry veterans, these providers claim to slash the time it takes to establish a 401k plan using new technology. One says they can deliver a 401k plan in just 15 minutes!

Here’s the problem. While technology might speed data collection and document delivery, it can’t reduce the amount of information 401k fiduciaries must supply a new 401k provider or guide 401k fiduciaries when picking 401k administration and investment options for their plan – the most time consuming steps in the 401k plan establishment process.

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Topics: Plan Design, Plan Setup

Safe Harbor 401k Plans: Answers To Common Questions

Posted by Eric Droblyen on Jun 15, 2016

“Safe harbor” 401k plans are the most popular type of 401k used by small businesses today. They automatically pass annual ADP/ACP and top heavy tests and allow business owners to maximize contributions to the plan. To achieve safe harbor status, owners are required to make a contribution on behalf of participating employees. For many employers, that trade-off is well worth the cost. Here’s why.

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Topics: Retirement Plan Types, Safe Harbor 401k, Plan Design

What’s Old Is New Again: “Mega Back Door” Roth IRA Contributions Spark New Interest in Old School After-Tax Contributions

Posted by Holly Roussel-Godfrey on May 24, 2016

Ever hear of voluntary 401k contributions? If you are like most people, probably not. They are after-tax employee contributions like Roth deferrals, but subject to different ERISA rules. Voluntary contributions have been around decades longer than Roth deferrals, but are less popular – mostly because their earnings can’t be withdrawn tax-free at retirement like Roth deferrals.

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Topics: Roth 401k, Plan Design

Plan Participation Problems? No Problem

Posted by Holly Roussel-Godfrey on May 10, 2016

You’ve made the decision to establish a 401(k) plan for your small business, but you’re concerned inertia or procrastination will prevent employees from using it. You know many workers think “I can’t afford to save much so there’s no point of saving at all” or “it’s OK for me to postpone savings because I’m not close to retirement.”

So how do you overcome these mental barriers or otherwise incentivize employees to participate in your new 401k plan? Two ways - education and plan design. Employees are more likely to participate today when they understand the cost of delay and when certain plan features are offered.

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Topics: Employee Enrollment, Plan Design

Happy Holidays from the Frugal Fiduciary! Our Top 10 Blogs of 2015

Posted by Eric Droblyen on Dec 30, 2015

Happy Holidays! As 2015 comes to a close, we looked back through this year’s blogs to find the most read. This process was instructive. We learned our most popular blogs were the ones written to simplify 401k administration or fiduciary requirements for employers. You can expect more blogs covering these topics during 2016.

So, in case you missed them the first time, or just want a refresher, here are our top 10 most read blogs of 2015.

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Topics: Fiduciary Responsibiilty, 401k fees, Plan Design, Thought Leadership

401k Plan Design – Our Checklist Can Make the Process Simple

Posted by Eric Droblyen on Nov 4, 2015

There is no such thing as a “one size fits all” 401k plan. Why? Employer goals for a 401k plan can vary greatly. Some employers want to maximize owner contributions at the lowest overall cost while others want to incentivize employees to save a portion of their paycheck for retirement. The process of matching 401k specifications to employer goals is called plan design.

There are 6 major features a 401k plan must define during the design process - eligibility, compensation, contributions, vesting, distributions and loans. Each of these features are described below. Use this checklist to choose the 401k specifications for your plan based on this information. Once the checklist is complete, a professional 401k provider can use it to help draft a formal plan document to govern your 401k plan.
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Topics: Plan Design

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