Employer Matching Contributions: The Cherry on Top of Your 401(k) Sundae

Welcome back, fellow 401(k) newbies!

Emma here, your friendly guide to all things 401(k). Today, we’re venturing into the exciting world of employer matching contributions. Why? Well, because I recently discovered that my own employer offers this awesome benefit. Everyone told me this was great news. At first I thought, “What’s the big deal”? I decided to look into it further and see how big of a difference matching would make for my portfolio. Turns out, it is a pretty sweet deal after all!

What Are Employer Matching Contributions, Anyway?

Imagine you’re at a party, and someone announces that there’s free ice cream for everyone. I mean, who doesn’t love free ice cream, right? Well, employer matching contributions are like that delectable treat, but for your 401(k) instead. It’s your employer saying, “Hey, we think you’re pretty awesome, so we’ll throw in some extra cash to help you save for retirement.” Now that’s what I call a sweet deal!

How Does It Work?

Your employer sets a “matching formula”, which is usually a percentage of your salary or your own contributions. For example, if your employer offers a 50% match on up to 4% of your salary, it means that for every dollar you contribute up to 4% of your salary, your employer will toss in an extra 50 cents. It’s like getting a bonus on top of your hard-earned savings. Who doesn’t love free money?

The Power of Doubling Your Savings

When your employer matches your contributions, it’s like they’re handing you an extra scoop of free savings. That additional cash will work its magic through your investments and compound interest, generating additional growth and returns without you having to lift a finger. 

So, seize this sweet opportunity and contribute as much as you can to make the most of those matching contributions. I’ve been amazed at how quickly my money multiplies with the extra boost.

Maximize Your Match and Seize the Sun-dae

Employer matching contributions are like the cherry on top of your 401(k) sundae. They’re a sweet boost to your retirement savings without any extra effort on your part. So, make sure to contribute at least enough to take full advantage of your employer’s matching program. Meaning, if they offer a 5% match, contribute the full 5%. 

Don’t leave that ice cream sitting there, waiting to be devoured!

If you have any more questions or want to explore further, head over to the Saveday blog. They have a toppings bar full of resources to help you make informed decisions and unleash the full potential of your retirement savings. 

Join me next week to take a scoop out of the hidden secrets behind types of securities! 
Keep saving!
-Emma

Affordable and Hassle-Free 401(k) Plans for Small Businesses | Saveday

Small businesses save more with SaveDay

As a small business owner, providing a 401(k) plan for your employees is a significant step towards their financial well-being and your company’s growth. However, the cost associated with setting up and managing a 401(k) plan can be a concern. Many companies tack on expensive startup fees, monthly and annual employer costs, per-employee fees, and other buried charges.

But with saveday, you can offer this valuable benefit without any startup cost. Saveday simplifies 401(k) plans for small business owners, eliminating the financial burden and reducing administrative hassle.

5 Ways Saveday Makes 401(k)s Affordable for Small Business

  1. Cost Savings: Saveday’s low cost removes the financial barrier that deters small businesses from offering retirement benefits. By waiving setup fees, saveday provides a robust savings solution within your budget.
  2. In-House Strategy: Saveday’s fully-bundled strategy eliminates at least 50% of industry average plan costs. With all plan requirements handled in-house, including Registered Investment Advisor, Broker/Dealer, and 401(k) Administrator, we save you money by not charging for revenue sharing with distribution partners.
  3. No Hidden Fees: Unlike competitors, saveday offers transparent pricing and a low AUM fee. We don’t burden you or your employees with monthly, annual, or per-employee fees. More money stays with you and your employees, as it should in retirement planning.
  4. Simple Plan Offerings: Saveday provides simple and flexible plan options tailored to your business’s needs. Whether you’re a sole proprietor or a growing startup, we can customize a 401(k) plan that aligns with your goals. Unlike other providers, we treat all plans equally, ensuring fair access to desirable features.
  5. Seamless Administration: Saveday’s intuitive platform simplifies plan administration. With payroll integration and automated processes for onboarding, contribution management, and reporting, we streamline the administrative tasks associated with a 401(k) plan. Focus on running your business while we handle the rest.

Saveday’s convenient to start, simple to use, and wildly affordable 401(k) plans enable small business owners to offer this vital benefit without financial strain. By providing a 401(k) plan, you support your employees’ financial future and attract top talent to your business. With legislative tailwinds pushing towards mandatory retirement benefits, take the proactive step and offer benefits today to avoid state-mandated deadlines and penalty fees. Trust saveday to make retirement planning accessible, affordable, and hassle-free for your business.

ETFs vs Mutual Funds: Why ETFs Win in Your 401(k)

Exchange Traded Funds or Mutual funds?

Welcome back, fellow 401(k) newbies!

I’m Emma, your young-adult guide to retirement savings. In my last post, we uncovered the secret recipe for growing your 401(k) snowball through the power of compound interest. 

Today, we’re tackling the intimidating by uncovering the world of Exchange Traded Funds (ETFs) and Mutual Funds. Trust me, they sound impossible to understand, but by the end of this post, you’ll see why ETFs are the real investing superheroes. And better yet, why saveday is the well-calculated call for your 401(k).

ETFs and Mutual Funds: Understanding the Basics

Alright, let’s get down to business. ETFs, also known as exchange-traded funds, are like those mixed bags of trail mix your dad grabs for road trips. (Or was that just my dad?) Instead of snacks, they contain a blend of stocks, bonds, and commodities for diversification. But here’s the exciting part: you can buy and sell ETFs throughout the trading day. Flexibility is the key to successful investing, my friends.

Now, let’s turn our attention to Mutual Funds. They’re like the well-meaning, but inflexible siblings of ETFs who always need a pit stop during the road trip. Mutual Funds can only be traded when the markets are closed. While they offer diversification and professional management, they lack the flexibility that makes ETFs so appealing.

Mutual Funds: Limited Options and Pricing Challenges

Ah, Mutual Funds. They mean well, but they come with their limitations. Buying and selling Mutual Funds takes an entire day, leaving you tapping your foot and anxiously waiting for that check. Even worse, Mutual Funds can only be bought or sold at their net asset value (NAV). This value represents the total worth of the fund’s assets minus liabilities, divided by the number of outstanding shares.

In simpler terms, the NAV pricing structure has its disadvantages. You can only trade Mutual Funds at the NAV price when the trading day ends. So, if you want to make a move during the day, you’ll have to wait until the market closes. This lack of flexibility can be frustrating, especially when you want to react quickly to market changes. Your wallet might miss out on potential gains.

Even worse, Mutual Funds often come with higher fees compared to ETFs, gobbling up more of your hard-earned returns. These fees include expense ratios, which cover the fund’s operating costs, and sales loads, which are charges incurred when buying or selling Mutual Funds. It’s like a road-trip buddy that insists on staying at expensive hotels, draining your travel budget! 

ETFs and Your 401(k): Unleashing the Benefits

That’s why saveday has your back with ETFs. Unlike Mutual Funds, which make you wait and potentially miss out on more retirement savings, saveday can make immediate moves based on Nobel Prize-winning strategies (they follow Modern Portfolio Theory). The lower fees associated with ETFs also help keep your costs down, leaving more of your nest egg ready to hatch into the sunny seaside retirement you deserve.

Honestly, the more I learn about saveday, the happier I am that my employer chose them for my 401(k) plan. And if you have any more questions, head over to the saveday blog. They have a treasure trove of resources to help you make informed decisions and supercharge your retirement savings.

Join me next week as we dive into the exciting topic of Employer Matching Contributions and what they mean for the future you and I are building!

Happy Saving!

-Emma

Setting Up a 401(k) as a Small Business: Key Requirements and Restrictions

As a small business owner, you may be considering the benefits of offering a 401(k) plan to your employees. You may live in a state that is mandating businesses to offer retirement plans and are investigating private plan options. Whatever your situation, saveday is here to help navigate the dos and don’ts of sponsoring a retirement plan.

 A 401(k) plan is a popular retirement savings method that provides tax advantages for both employers and employees. However, before diving into the world of retirement plans, it’s important to understand the key requirements and restrictions associated with setting up and managing such a plan.

Who can set up a 401(k) plan?

A 401(k) plan can be established by various types of small businesses, including sole proprietorships, partnerships, limited liability companies (LLCs), corporations, and certain non-profit organizations. The eligibility to set up a 401(k) plan depends on the structure and nature of the business. To learn more you can read the IRS 401(k) page here, but we’ve listed the key considerations below…

Key Considerations:

  1. Eligibility: A 401(k) plan must be offered to all eligible employees, which includes part-time workers, as long as they meet specific criteria such as age and length of service. Ensuring compliance with eligibility requirements is essential to avoid discrimination issues. Saveday can help you navigate the eligibility criteria and ensure that your plan is inclusive and compliant.
  1. Contribution limits: The IRS sets annual limits on the amount employees can contribute to their 401(k) accounts. For 2023, the elective deferral limit is $20,500, with an additional catch-up contribution of $6,500 for individuals aged 50 or older. These limits are subject to adjustment by the IRS in subsequent years. Saveday’s platform enables easy tracking of employee contributions and ensures that they stay within the IRS limits.
  1. Employer Contributions: While not mandatory, employers have the option to make contributions to their employees’ 401(k) accounts. These contributions can take the form of matching contributions or profit-sharing contributions. However, there are rules and limits governing employer contributions, including non-discrimination requirements. Saveday can assist you in designing and implementing an employer contribution strategy that aligns with your business goals and maximizes employee benefits.
  1. Vesting: Vesting refers to the ownership of contributions made by the employer. The IRS has specific rules on vesting schedules, which determine when employees have full ownership of employer contributions. Understanding vesting schedules is crucial for both employers and employees. Saveday can help you establish vesting schedules that are fair and compliant with IRS regulations.
  1. Testing and Reporting: The IRS requires certain tests to ensure that the 401(k) plan does not disproportionately favor highly compensated employees. These tests include the Actual Deferral Percentage (ADP) test, Actual Contribution Percentage (ACP) test, and top-heavy testing. Additionally, annual reporting of the plan’s activity is required through Form 5500, which provides transparency and accountability. Saveday offers complimentary custodial services – which means we do all the reporting and filing for you, at no additional cost.
  1. Fiduciary Responsibilities: As a plan sponsor, you have fiduciary responsibilities to act in the best interests of the plan participants. This includes prudently selecting and monitoring investment options, providing plan information to participants, and ensuring compliance with Employee Retirement Income Security Act (ERISA) regulations. Saveday can act as your ERISA 3(16) and 3(38) fiduciary, relieving you of some of these responsibilities.

Starting a 401(k) at $0 Cost to Your Business

By partnering with saveday, you’ll not only set your small business on the path to a successful 401(k) plan, but you’ll also empower your employees to achieve a secure retirement. With our expertise and personalized guidance, saveday becomes your trusted ally in navigating the complexities of 401(k) plans. We’ll ensure that you meet all key requirements, comply with regulations, and provide your employees with valuable benefits.

Don’t wait any longer to take the first step towards offering a competitive retirement savings option for your employees. Contact saveday today and discover how our services can make a significant difference in your small business. Together, we’ll create a plan that meets your unique needs and helps your employees build a solid financial future. Your commitment to their well-being will set your business apart and contribute to their long-term success. Let saveday be your partner in making it happen.

401(k) Plan vs. State-Sponsored Plans: Maximizing Small Business Success with Saveday

401(k) plans vs. State Plans

401(k) Plans vs. State-Sponsored Plans, which one is best? As more states implement legislation in response to the SECURE 2.0 Act, which mandates small businesses to offer retirement benefits, many owners find themselves searching for private providers or considering state-sponsored plans.

When facing deadlines and penalties, the allure of state plans as simple and affordable options can be tempting.

But don’t be deceived! State plans have limitations, lack customization, hide fees, and may not adequately prepare for retirement. This leaves employees seeking additional investment options.

Now, let’s delve into the distinctions between state-sponsored plans and saveday’s 401(k) plan.

State Plans: Traditional Yet Limited

State-funded plans typically offer only Roth IRAs. With Roth IRAs, or Individual Retirement Accounts, employees contribute post-tax dollars, which means their money is generally tax free at the time of withdrawal. 

There are some downsides to only offering IRAs in your retirement benefits plan. IRAs exclude high-income earners and have a maximum annual contribution limit of $6,500 in 2023, or $7,500 for those over 50. They are generally considered to be insufficient for retirement planning alone, meaning those who contribute to IRAs typically have to find another way to save money for retirement. In addition, many state plans tack on additional fees associated with plan management, which can make them a less attractive option than they appear. 

On the positive side, state plans offer a straightforward solution for businesses seeking a retirement plan without extensive setup requirements. Enrollment in the state-sponsored plan means businesses will be compliant with state mandates, and can avoid costly penalty fees. 

However, businesses often encounter limitations such as restricted investment options and a lack of personalization to align with specific business goals. Additionally, state plans may incur higher administrative costs, impacting your bottom line in the long run. State plans are also ineligible for SECURE Tax Credits, which can compensate for up to $16,500 in plan costs during the first three years of sponsoring a plan. 401(k) plan sponsors are eligible for these credits.

Saveday 401(k): Revolutionizing Retirement for Small Business

Let’s look at the features of a 401(k) that make it a compelling choice for small business owners:

1. Low for Employers

This is retirement planning the way it was supposed to be—with no middleman, hidden fees, or hassle. We cut administrative costs so that retirement benefits are accessible to everyone and so that small businesses can put that money back into their operations. 

2. Personalized Guidance

State plans are cookie cutter, with IRAs treating everyone the same. Saveday offers Traditional and Roth plans, with a Risk Assessment that helps employees select the portfolio that’s best for them, and daily auto-rebalancing to protect portfolio health.

3. Empowering Employees

With saveday, employees can contribute up to $22,500 in 2023. Having the ability to contribute more to their retirement accounts puts employees much closer to their retirement goals than with an IRA. But that’s not all. Employees can also enjoy employer matching, profit sharing, and vesting schedules unavailable in state plans.

4. Streamlined Administration

Saveday simplifies the administrative burdens associated with managing a 401(k) plan. Our intuitive platform automates key processes, reduces paperwork, and offers seamless integration with payroll systems. Say goodbye to the headaches of complex plan administration and enjoy a streamlined experience that saves you time and effort. 

Claim Your Victory with Saveday

In the comparison of State Plans versus offering a 401(k) through saveday, the clear victor emerges for small business owners seeking a retirement plan that maximizes benefits and flexibility. While State Plans seem convenient, saveday is the small-business retirement planning solution. 

Empower your small business and provide your employees with a retirement plan that aligns with their aspirations. With saveday, retirement planning becomes an exciting journey that leads to a brighter future for all.

Looking to learn more? Expand your small business savvy by reading more of our blog here!

Understanding Form 5500: Essential Reporting for Your Employee Benefit Plans

Navigating employee benefit plans and ensuring compliance can be overwhelming for small business owners. However, with the right resources and assistance, this process becomes more manageable. In this blog post, we’ll explore the significance of Form 5500, its requirements, and how saveday, as your leading 401(k) provider, can simplify your reporting obligations. Let’s dive in!

Wondering which Form 5500 your business should file? Check out our Form 5500 eligibility post here.

What is Form 5500?

Form 5500 is an annual report required by the IRS, Department of Labor (DOL), and Pension Benefit Guaranty Corporation (PBGC) for employee benefit plans. It provides crucial information about your plan’s activities, financial condition, and overall operations.

Why is Form 5500 important?

Filing Form 5500 goes beyond meeting legal obligations. It ensures transparency, compliance, and protects the interests of both employers and employees. By submitting this form, you demonstrate your commitment to accountability and provide valuable information to government agencies for research and compliance purposes.

What information does Form 5500 require?

Form 5500 requires comprehensive details about your employee benefit plan, including general plan information, service provider details, participant counts, financial data such as assets and liabilities, types of benefits offered, operational activities, and plan funding. It offers a holistic view of your plan’s health and performance.

To learn more about the different types of Form 5500, check out our detailed guide here!

Simplified Compliance Testing

Maintaining the integrity of your 401(k) plan involves conducting compliance testing, which is crucial. At saveday, we understand the complexities involved in this process and offer you support every step of the way. Here’s how saveday can assist your small business:

  1. Fairness and Equal Opportunity:

Saveday ensures that your 401(k) plan operates fairly and provides equal opportunities for all employees to save for retirement. Through comprehensive compliance testing, saveday helps prevent favoritism towards owners or highly compensated employees, fostering a level playing field for all participants.

  1. Expert Guidance:

Saveday’s team of retirement plan experts is well-versed in IRS regulations and compliance testing requirements. They provide personalized guidance, ensuring that your plan meets all necessary guidelines and restrictions.

  1. Plan Optimization:

Saveday helps optimize your plan to ensure compliance while maximizing benefits for your employees. They analyze your plan’s structure, contribution limits, and other factors to create a tailored solution that suits your business needs.

  1. Streamlined Administration:

Saveday’s intuitive platform simplifies plan administration, including Form 5500 reporting. With automated data collection and reporting features, you can streamline the filing process, saving time and effort.

Summary

Filing Form 5500 and conducting compliance testing are crucial responsibilities for small business owners with employee benefit plans. By partnering with saveday, you can simplify these obligations, comply with regulations, and protect the interests of your employees. Transparency, fairness, and adherence to IRS guidelines contribute to the long-term success of your business and the financial well-being of your employees. Stay informed, stay compliant, and continue providing valuable benefits through your employee benefit plans. We’re with you every step of the way!