401(k) Plan Consultant

If you’re thinking of implementing a 401(k) plan for your business, then the very thought of how to find the best plan with the best investment options and the lowest expenses may seem like a mind-boggling task.

Fortunately, there are 401(k) plan consultants that can help you to effectively navigate through the confusing maze of options and rules that make up the 401(k) plan marketplace today.

A 401(k) plan consultant can help you in many respects.



The first thing that a good consultant will do is help you by first listening to your wants and needs for the plan.

Then he or she can help you to focus on foundational factors, such as identifying the objectives of your plan, setting up plan operations and then maintaining and optimizing your plan for the benefit of your employees.

Plan Objectives

Before you can implement any type of 401(k) plan successfully, you must first know exactly  ant to prohibit plan participation for new employees by one year so that you can see whether that employee will be a good fit for his or her position in the long run.

Or you may want plan participation to start immediately in order to draw in more prospective employees.

There are any number of features in 401(k) plans that can be customized to your personal wants and needs, and a good consultant can help you to think things through until you know exactly what you want from your plan.

Then you can easily incorporate those features into the plan when you first set it up.

Plan Setup

Most of the customized features that you’ll want to incorporate into your company’s plan will be laid out in the plan document, or charter.

401(k) consultant Sapling Wealth Management lists the following features that can be altered to your liking:

  • Eligibility Criteria
  • Contributions – Deferrals, Corporate Matching, Profit Sharing
  • Vesting & Forfeitures
  • Distributions & Loans
  • Compliance & Other

Compliance Issues

The first thing that employers must realize when they establish any kind of qualified retirement savings plan is that they, along with the plan’s trustee and administrator, all become plan fiduciaries.

This means that they are legally obligated to act unconditionally in the plan’s and plan participants’ best interests at all times.

If the employer is not qualified to evaluate the performance of the plan’s investment choices, then it is obligated to hire this task of oversight out to a third party.

A good 401(k) consultant can help you to find a competent expert to do this at the best possible price.

Investment Management 

A plan consultant can help your plan to find and use competitive investment offerings and can also assist in the process of monitoring the investment offerings on an ongoing basis.

Every 401(k) plan has to have at least three separate investment choices, and some plans have dozens.

A good plan consultant can help you to separate the wheat from the chaff when it comes to investment selection.

Cost Cutting

A good plan consultant can also help you to minimize expenses related to administering your plan.

He or she can spot features or benefits that are being underused or ignored by plan participants and help you to either change or eliminate them.

Plan consultants can also help your business to streamline your plan and seamlessly integrate it into your payroll, thus saving your HR officer or department a great deal of time and effort.

A good plan consultant can help you implement the 401(k) plan that you want in every step of the way.

From establishment to operations and record-keeping, your consultant may become one of your business’s most trusted advisors.

401(k) Plan Consultant FAQs

A 401(k) plan is a retirement plan offered by an employer designed to help employees save for retirement.
401(k) plan consultants can help you to effectively navigate through the confusing maze of options and rules that make up the 401(k) plan marketplace today.
With a Roth 401(k), taxes are paid as money is put into the retirement account. With a traditional 401(k), taxes are paid as money is taken out.
Alternatives to 401(k) plans include traditional IRAs, Roth IRAs, pension plans (if your employer offers one), and 403(b) retirement plans for employees of non-profit organizations.

What Is a 401(k) Plan?

401(k) Meaning

The 401(k) retirement savings account got its name from the Revenue Act of 1978, where an addition to the Internal Revenue Services (IRS) code was added in section 401(k).

Consequently, 401(k) does not stand for anything except for the section of IRS tax code it was created in.

Traditional 401(k) vs Roth 401(k)

There are two types of 401(k) plans: Traditional and Roth 401(k)s.

The traditional 401(k), named after the relevant section of the IRS code, has been around since 1978.

With this plan, any contributions you make to the 401(k) account will reduce your income taxes for that year and will be taxed when they are withdrawn.

Roth 401(k)s, named after former senator William Roth of Delaware, were introduced in 2006.

Unlike a traditional 401(k), all contributions are made with after-tax dollars and the funds in the Roth 401(k) account accrue tax free.

Typically, employees can take advantage of both plans at the same time, which is recommended among financial advisors to maximize retirement savings.

Because of the way the contribution limits work, it is possible to invest different amounts into each account, even year-to-year, so long as the total contribution does not exceed the set limit.

Contributing to Your 401(k) Retirement Plan

Contributing to a 401(k) plan is traditionally done through one’s employer.

Typically, the employer will automatically enroll you in a 401(k) that you may contribute to at your discretion.

If you are self-employed, you may enroll in a 401(k) plan through an online broker, such as TD Ameritrade.

If your employer offers both types of 401(k) accounts, then you will most likely be able to contribute to either or both at your discretion.

To reiterate, with a traditional 401(k), making a contribution reduces your income taxes for that year, saving you money in the short term, but the funds will be taxed when they are withdrawn.

With a Roth 401(k), your contributions can be made only after taxation, which costs more in the short term, but the funds will be tax free when you withdraw them.

Because of this, deciding which plan will benefit you more involves figuring out in what tax bracket you will be when you retire.

If you expect to be in a lower tax bracket upon retirement, then a traditional 401(k) may help you more in the long term.

You will be able to take advantage of the immediate tax break while your taxes are higher, while minimizing the portion taken out of your withdrawal once you move to a lower tax bracket.

On the other hand, a Roth 401(k) may be more advantageous if you expect the opposite to be true.

In that case, you can opt to bite the bullet on heavy taxation today, but avoid a higher tax burden if your tax bracket moves up.

Check out this article from Forbes to see the IRS tax rate tables for 2020, but remember that they are subject to change.

A smart move may be to hedge your bets and divide your contributions between the two types of IRAs.

If your employer allows you to add funds to both a traditional and Roth 401(k), then doing so reduces the potential risks of each.

In this case, you will also have the ability to decide what proportion of your income goes into each account, meaning that as you near retirement and have a clearer idea of what position you will be in, you can put more into one or the other.

When you do decide which avenue to take, make sure to thoroughly evaluate your decision.

Moving funds from one account to another, such as from a traditional to a Roth 401(k), is time consuming and expensive, if even possible.

Likewise, transferring a 401(k) from one employer to another in the event of a job change is also tricky.

You want to make sure that when you put money into your plan, it will be able to sit undisturbed for a very long time.

Pension vs 401(k)

Pensions are similar to a 401(k), but are a liability to a company.

If an employer offers an employee a pension, it means that they are promising to pay out a set amount of money to the employee at the time of their retirement.

There is typically no option to grow this amount, but it also does not require any financial investment from the employee.

Pensions, also referred to as defined-benefit plans, are becoming increasingly rare because it puts the financial burden of offering a retirement fund for employees entirely on the employer.

401(k)s, which are also called defined-contribution plans, take some of the financial pressure off of an employer, while also allowing employees to potentially earn a larger retirement package than they would have with a pension.

How Much Should I Contribute to My 401(k)?

Most financial experts say you should contribute around 10%-15% of your monthly gross income to a retirement savings account, including but not limited to a 401(k).

There are limits on how much you can contribute to it that are outlined in detail below.

There are two methods of contributing funds to your 401(k).

The main way of adding new funds to your account is to contribute a portion of your own income directly.

This is usually done through automatic payroll withholding (i.e. the amount that you wish to contribute, counting all adjustments for taxation, is simply withheld when receiving payment and automatically put into a 401(k)).

The system mandates that the majority of direct financial contributions will come from your own pocket.

It is essential that, when making contributions, you consider the trajectory of the specific investments you are making to increase the likelihood of a positive return.

The second method comes from deposits that an employer matches.

Usually employers will match a deposit based on a set formula, such as 50 cents per dollar contributed by the employee.

However, employers are only able to contribute to a traditional 401(k), not a Roth 401(k) plan.

This is especially important to keep in mind if you want to utilize both types of plans.

A key variable to keep in mind is that there are set limits for how much you can add to a 401(k) in a single year.

For employees under 50 years of age, this amount is $19,500, as of 2020. For employees over 50 years of age, the amount is $25,000.

If you have a traditional 401(k), you can also elect to make non-deductible after-tax contributions.

The absolute limit, counting this choice and all employer contributions, is $57,000 for employees under 50, and $63,000 for those over 50 as of 2019.

Plan in Advance

Allow us to help you prepare and plan for your retirement ahead. Contact a financial advisor in St Helena, CA or visit our financial advisor page for other details.

401(k) Plan FAQs

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.