FREQUENTLY ASKED QUESTIONS ABOUT 401(k)’S, TPA SERVICES, AND RETIREMENT PLAN RELATED TOPICS
WHAT IS A TPA?
A TPA (Third Party Administrator) works with employers on their retirement plan objectives, such as establishing a 401(k). A 401(k) TPA is retained by the Plan Sponsor to perform critical tasks required to maintain plan compliance.
WHY SHOULD I CONSIDER USING A TPA?
A qualified retirement plan, in additional to being for the benefit of the plan participants and their beneficiaries, must perform certain testing, reporting, and disclosure functions to be qualified. A TPA will work with Plan Sponsors (employers, HR managers, for example) to assist them in performing their duties to the plan. The services that a TPA generally will perform are:
- Plan Design and Document Services: Consultation, Plan Document Creation, Plan Participant Notices
- Non-discrimination Testing
- Employer Allocation Preparation
- Account Reconciliation Services
- Valuation Reporting
- Government Filing Services
- Dedicated Consultants and One-on-One Support
While not all Plan Sponsors select a TPA, the benefits of using one may help the Plan Sponsor avoid costly mistakes.
HOW DO I SELECT THE RIGHT 401(k) TPA?
TPA services can vary, widely. Selecting the right one for your retirement plan comes down to asking questions, a lot of questions:
- Does the TPA offer financial advice (aka are a “producing” TPA)?
- Does the TPA hold the assets of the plan (as a recordkeeper with daily valuation services)?
- Will the TPA provide support in designing the right plan for your company?
- What qualifications do the administrators hold?
- How long has the TPA been in business?
- Are there any conflicts of interest? Do they prepare the 5500 and audit it as well?
- Does the party introducing you to the TPA have any concerns?
- Does the TPA have clients that are in a similar line of business as you?
- Is the data collected by the TPA secured?
- What are the expenses?
While cost is an important factor, you should review all expenses and their respective services. Ask yourself: Are we receiving value for the cost?
HOW CAN I START A RETIREMENT PLAN FOR MY COMPANY?
It’s easier than you might think! If you are working with a Financial Advisor, inquire if they have resources to help support you and your future participants should you elect to establish a retirement plan. Contact a Uniglobal Consultant to explore options about plan design and capabilites. Our team can offer insights that will better prepare you to sponsor a plan. Call 888.679.401K and speak with us, we’re here to help. Or just visit our Plan page to get started!
CAN UNIGLOBAL WORK WITH A START-UP COMPANY?
Yes we do! Our services are for all employers; we believe everyone should have the ability to save for retirement, that is why we are here.
I AM A ONE-PERSON COMPANY, CAN I HAVE A RETIREMENT PLAN?
The short answer is yes, but you will want to make certain that it is properly designed in the event you hire on a second employee. Your Solo-K may not always only cover you. We can help you craft the perfect plan.
DOES UNIGLOBAL PROVIDE FINANCIAL ADVICE?
WITH UNIGLOBAL AS OUR 401(K) TPA, WHAT ASSET PROVIDERS ARE AVAILABLE FOR OUR COMPANY’S RETIREMENT PLAN?
The answer truly is virtually any of the big industry brands. Our partnerships with many of the best in class Asset Providers bring an integrated, unified, experience to our clients, a few of them are:
WHAT IS A 401(K) PLAN?
A 401(k) is a component of a qualified profit-sharing plan; it allows employees to contribute a portion of their wages into an individual account. The benefit is that an employee, by contributing “elective salary deferrals,” not only saves for retirement but those deferrals are excluded from the employee’s taxable income (except for designated Roth deferrals).
WHAT IS A MATCH?
Employers sponsoring a qualified retirement plan may contribute to employees’ accounts by offering an Employer Match. Only participants that elect to defer into the plan share in the Employer Match, unlike an Employer Profit Sharing (or non-elective) Contribution.
WHAT IS PROFIT SHARING?
Employer’s may offer a Profit Sharing contribution as part of their retirement program. This contribution is generally allocated to all plan participants, regardless of them electing to defer into the plan of their own wages.
Good news! The Salary Deferral amount has increased to $19,000, $500 more than what it was in 2018. For those turning 50 or are over the age of 50, the Catch-Up Contribution affords you an additional $6,000 you may defer, this limit has not increased from 2018. The IRS has also increased 3 Defined Contribution Plan Limits: 1. “The limitation for defined contribution plans under Section 415(c)(1)(A) is increased from $55,000 to $56,000.” 2. “The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $275,000 to $280,000.” 3. "The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $120,000 to $125,000."
WHAT IS A SAFE HARBOR 401(k) PLAN?
A Safe Harbor 401(k) plan is a type of employer-sponsored qualified retirement plan that generally satisfies the nondiscrimination testing provided the employer meet certain criteria with respect to contributions, vesting, and employee notification. The Safe Harbor 401(k) Plan is an attractive offer for employers. The Safe Harbor provision can be structured in more than one way to meet objectives.
WHEN CAN I START A SAFE HARBOR PLAN?
Depending upon the plan year, a Safe Harbor plan must be established and in place for at least 3 months to be effective in that same calendar year. Existing plans that want to amend to adopt a Safe Harbor provision should do so well before the end of their current plan year to be effective for the next plan year.
HCE is an acronym for “Highly Compensated Employee.” An HCE is defined as any employee of a company who satisfies at least one of the following:
- Owned a more than 5% interest in the business, regardless of compensation paid, at any time during the current or preceding year, or
- Had stock attribution from the person in the first point, or,
- Received compensation from the business of more than $125,000 (if the preceding year is 2019; otherwise, $120,000 if the preceding year is 2016, 2017, or 2018), and, if the employer so chooses, was in the top 20% of employees when ranked by compensation. The compensation limit is an amount that may fluctuate annually.
A Key Employee is any employee meeting at least one of the following criteria at any time during the Plan Year:
- Owns more than 5% of the interest in the company at any time during the year or the prior year, or
- Any spouse, child, parent, or grandparent of such more than 5% owner employed by the company, or
- Owns more than 1% of the interest in the company AND received compensation in excess of $150,000, or
- An officer receiving compensation in excess of $180,000 in 2019; the amount in prior years was $175,000 in 2018 and $170,000 in 2015, 2016 and 2017.
WHAT ARE NON-ELECTIVE CONTRIBUTIONS?
Employer Non-Elective contributions are contributions to a retirement plan that do not require an election by the participant to receive the contribution. In other words, it’s money allocated to participants without those participants having to defer from compensation into the plan. In a 401(k), generally, this type of contribution is synonymous with Profit Sharing. Unlike an Employer Match, where participants must defer from compensation to share in the Employer Match, Employer Non-Elective Contributions are allocated to all eligible participants regardless of them contributing to the plan from compensation.
WHAT ARE HARDSHIP DISTRIBUTIONS?
If the plan allows, a participant may take a distribution while still employed on account of financial hardship. These hardship distributions from elective deferrals are taxed when distributed and are not repaid. A hardship distribution is limited to the amount needed to satisfy the heavy and financial need. In other words, if a participant requests a hardship on account of medical bills totaling $400 they may not take more than $400.