🎵 “On the first day of Christmas, my true love sent to me”… 🎵 Wait, wait, hold up! We’re not here to talk about partridges, pear trees, or any other holiday nonsense. ‘Tis the season to debunk some common myths about retirement plan administration and establishment!
Welcome to our myth-busting carol, where we’ll strip away the misconceptions and get to the heart of retirement planning. Whether you’re dreaming of sipping piña coladas on a tropical beach or just want to ensure you can enjoy a comfortable retirement, let’s set the record straight.
On the First Day of Retirement Planning, the Myth They Told to Me: Retirement plans are too expensive to set up and maintain.
Reality: While there are costs associated with retirement plan administration and establishment, the long-term benefits to both employers and employees, often outweigh these expenses. Many plans offer tax advantages and legislation passed the past few years offers tax credits that can offset setup costs. Plus, investing in your employees’ futures leads to increased job satisfaction and retention – even better than a bird and tree!
On the Second Day of Retirement Planning, the Myth They Told to Me: Only large companies can afford to sponsor retirement plans.
Reality: Small businesses can also benefit from offering retirement plans in a big way. Significant tax credits are available for small businesses now, making the costs to establish and administer a plan much lower. This is more valuable than two turtle doves…unless we’re talking chocolate…then…it’s a close call.
On the Third Day of Retirement Planning, the Myth They Told to Me: Employees aren’t interested in retirement benefits.
Reality: Studies show that retirement benefits are a top priority for many employees when choosing an employer. A recent study found that 60% of employees cited retirement benefits as a reason they stay with their current employers. Additionally, 47% believe a retirement plan is an important reason to join a company (no French hens were cited as reasons, we might add). So, clearly, offering a retirement plan can make your company more attractive to potential hires and help retain current employees.
On the Fourth Day of Retirement Planning, the Myth They Told to Me: Retirement plan administration is too complex and time-consuming.
Reality: While sponsoring a plan does involve additional tasks for employers, the right service providers can make this much easier. As a TPA, EGPS sends clear communications (NOT four calling birds) when any action is needed from a plan sponsor. In addition, if clients engage our 3(16) services, we take on most of these tasks for employers!
On the Fifth Day of Retirement Planning, the Myth They Told to Me: Retirement plans don’t offer any immediate benefits.
Reality: Besides the long-term financial security they provide, retirement plans can offer immediate tax benefits to both employers and employees. Contributions made by employers may be tax-deductible, reducing your taxable income. While five golden rings sound amazing, we think these benefits are even more stellar.
On the Sixth Day of Retirement Planning, the Myth They Told to Me: My payroll provider can do retirement plan administration, too, and cheaper.
Reality: Depending on your payroll provider, it’s important to do research before using a payroll provider for retirement plan services. Retirement plans require employers to adhere to a complex cross-section of rules and regulations, and not all payroll providers have experts on their team to navigate these. Plans must comply with the Internal Revenue Code, ERISA, Department of Labor regulations, and the terms of the plan document. To complicate matters, the government continually updates rules and regulations (heard of SECURE and SECURE 2.0 anyone?).
This is why it’s important for employers to have a team of retirement plan experts administering their plan. EGPS boasts a team of knowledgeable staff that can keep employers’ plans in compliance as they build their nest eggs (not to be confused with geese and any eggs they might be a-layin’).
On the Seventh Day of Retirement Planning, the Myth They Told to Me: I only have a few employees, so I should only have a SIMPLE or SEP IRA.
Reality: Choosing the right retirement plan for your business and employees isn’t typically driven by headcount (or bird count, even if you’ve just been gifted seven swans a-swimming to add to your ever-growing collection). 401(k) plans allow for higher contributions than SIMPLE IRAs, and profit sharing plans offer flexible formulas that SEP IRAs do not. Additionally, plan sponsors have more discretion over plan provisions, such as eligibility and distributions, and this can sometimes provide a compelling reason to implement 401(k) or profit sharing plans over the IRA-based plans.
Careful analyzation of your contribution and benefit goals, as well as your employee census, will allow industry professionals (aka EGPS) to compile the best plan options for your consideration.
On the Eighth Day of Retirement Planning, the Myth They Told to Me: My state has established a mandatory retirement program, so I have to enroll in that (and it seems easier and cheaper).
Reality: Several states have implemented, or are in the process of implementing, mandatory retirement programs. BUT if an employer offers their own retirement plan, they are not required to enroll in the state’s program.
In addition, state sponsored programs have a lot of limitations. By sponsoring your own plan, business owners experience these benefits (milk ‘em for all they are worth with those eight maids):
- Plan design flexibility
- Higher contribution limits
- Greater tax benefits
- Employee retention/recruiting benefits
- And much more!
On the Ninth Day of Retirement Planning, the Myth They Told to Me: Retirement plans are a one-size-fits-all solution.
Reality: There are various types of retirement plans available, each with its own features and flexibility. At EGPS, we design and administer several different plan types, based on the unique needs and goals of each client. Working with EGPS and your financial advisor can help you select the best plan for your specific business (from dance troupes to dairy farmers or anything in between).
On the Tenth Day of Retirement Planning, the Myth They Told to Me: It’s so much easier to just bundle retirement plan administration with my recordkeeper.
Reality: Bundled providers typically have limited plan design and document flexibility. This is due to their automation requirements and reliance on the employer’s involvement in day-to-day plan functions. Therefore, unless employers are confident in their ability to perform retirement plan responsibilities and only want a simple plan design, they should choose the unbundled option. In this scenario, the TPA and the recordkeeper bring their unique expertise to the plan and work collaboratively in the best interest of the participants and employer. It’s enough to make employers jump for joy (why not join those ten lords a-leaping?).
On the Eleventh Day of Retirement Planning, the Myth They Told to Me: Setting up a retirement plan takes too long/is too difficult.
Reality: With the right guidance, setting up a retirement plan can be a straightforward process. EGPS offers streamlined setup and onboarding services, making it easier than ever to get started. We provide:
- A dedicated liaison between the client, recordkeeper, and advisor
- Answers to all questions, kindly and promptly
- Clear expectations and timelines upfront
- Compliance experts that ensure the plan meets all regulatory requirements
Eleven pipers piping
On the Twelfth Day of Retirement Planning, the Myth They Told to Me: Once a retirement plan is set up, it can’t be changed.
Reality: Retirement plans can often be adjusted to better meet the needs of your business and employees. Regular reviews and updates ensure the plan remains effective and beneficial for everyone involved. EGPS provides this level of consultation and regular plan reviews to our clients, based on business changes, goal changes, or legislation changes. We’ll drum up any changes needed (without the headache of those pesky dozen drummers).
Contact us for more information on retirement plan administration and establishment!
Don’t let these myths hold you back from all the benefits of a customized retirement plan. Reach out using the form below and our team will send you more information about various plan types and options.
Happy Holidays and Happy Retirement Planning!
