10 Top 401(k) Myths & FAQ’s For Businesses (keeping it simple)

Plus, Answers to Your Voluntary Supplemental Benefits Questions

Many of our clients ask us what we see in our industry regarding retirement plans 401(k)’s and voluntary benefits. Their time is valuable and they are trying to reduce expenses, yet they need to attract and retain key employees.

As an Insurance Agency with 20+ years of experience, we know the benefits world has changed dramatically. We also know that sometimes our clients make decisions, or non-decisions, on old school rules.

With that in mind, here’s the 10 top 401(k) myths and frequently asked questions we get from our business clients and peers.

10 Top 401(k) Myths and FAQ’s:

1. I Can’t Afford To Offer A Match: As an owner, look at gross revenues, not at the cost of a match. We all have payroll expenses and related taxes. We pay the taxes out of our gross revenues, right? For many plans, the PERSONAL TAX SAVINGS OF THE OWNERS IS GREATER THAN THE COST OF THE MATCH WHEN YOUR PLAN IS PROPERLY DESIGNED! What does this mean? It means that if your plan is properly designed, the match doesn’t cost you anything. Cash flow is unaffected or sometimes even increased if done correctly.
2. I Don’t Want The Personal Liability: If structured with the right providers and service team, your only liability is to signing the annual 5500 form. That’s all!
3. My Employees Won’t Participate: Educate them in a simple manner and they will. Many plans now auto-enroll their participants.
4. It’s Too Much Administration: Depending on how you process payroll and what provider you choose, you may not have to do anything until the year-end reporting comes due.
5. My Employees Don’t Know Or Don’t Want To Know About Investing: They don’t need to, most plans use an automatic, age-based, investment account that the plan chooses with the investment advisor.
6. I Only Want To Offer It To My Key Employees: You can have very strict eligibility rules and even offer different benefit amounts to different employees. Current plan documents have A LOT of flexibility.
7. Why Make Tax Deductible Contributions Now And Pay Out At (presumed) Higher Tax Rates In The Future?: Most plans can offer 401(k) ROTH contributions (up to $18k per year), that are NOT taxed at all upon withdrawal after age 59 ½.
8. It Costs Too Much To Offer: Average plan costs are $500-$1k to set up and about $1,500 in admin and compliance costs.
9. My Advisor Doesn’t Want To Waste His Time On A Small 401(k) Plan: While this is becoming more and more true with some companies, The Piedmont Group DOES want to work with you.
10. It’s Too Complicated: The industry does this to you. It’s actually pretty simple when working with a team that specialized in these plans. We have that team available for you.

Voluntary/Supplemental Benefits FAQ’s:

1. What is Supplemental Insurance?: Supplemental Insurance has become extremely valuable, and more popular, as our traditional health insurance programs have become more expensive, while also requiring higher deductibles, co-pays, and out-of-pocket expenses. Traditional insurance also pays the provider directly and then sends a bill to the policy holder for the difference. Plus, Supplemental Insurance pays cash directly to the policy holder, NOT to the provider. The policy owner can use the cash for any reason, and are getting the cash when they need it the most, after an unexpected accident, injury, or illness.
2. I Got Turned Off By The Hard Sell Approach Last Time We Tried This: This has been the bad rap for a long time. At The Piedmont Group, we take an educational approach, as most people don’t even know this type of personal protection exists. We don’t hard sell, we don’t soft sell. We help your employees understand what options they have to solve their personal concerns when it comes to protecting themselves in the event the unexpected happens. And we will be there to help service them if/when the unexpected does happen.
3. These Policies Don’t Pay What They Say They Will: Many older policies have not kept up with the current environment. This is why it’s important to take a look at current programs. Old programs that only paid out benefits for minimal reasons have been upgraded tremendously. And now policy holders can have up to 12 months to process a claim after an accident or illness.
4. I Don’t Want Any More Payroll Deduction Programs: You DO NOT have to do payroll deductions. Nuff’ said!
5. We Can’t Afford It: The company does not have to pay anything and these very valuable policies start at as little as $4 per week

This quick summary covers a majority of the questions and concerns we hear when speaking with our clients. We hope this clears up some of the mystery and miss-information that is out there. If you would like to discuss your company’s current benefits, or lack there-of, just send us an email and we will set up a convenient time to get together.