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The 401(k) is no longer an optional benefit - employees expect it just as much as health insurance. The hurdle for most businesses is to put together a 401(k) plan that is up-to-date, easy to use and cost effective.
Employers Resource overcomes these hurdles for your company without need to invest time and money into plan design, investment performance and service, making the the Employers Resource 401(k) plan a key element for your financial future.
The Value Proposition
The Employers Resource 401(k) Plan is one of the greatest values in the employee leasing arrangement. Typically, the high cost of administration makes the 401(k) impractical for most small-to medium-sized businesses. The design, scale and efficiency of the Employers Resource 401(k) Plan allows you to offer a sophisticated retirement program at a fraction of the cost required to establish and maintain an individual plan. The table on the next page compares the cost of an individual company 401(k) plan with the Multiple Employer Employers Resource Plan.
Investment Platform
The line up of mutual funds that comprise the investment platform are highly rated funds. They have been carefully selected by the Employers Resource's Investment Committee for rating, expenses and stability of the fund. The overall platform utilizes funds with varied investment styles such as value, blend and growth. Some of the fund families featured on our platform are: Fidelity, Janus, Scudder, Strong, Gabelli, Dreyfus, Oppenheimer, American Funds, T.Rowe Price, INVESCO, Vanguard, SSgA, John Hancock, AIM
Pre-Allocated Portfolios
Employees who are not familiar with investing and assessing risk can select an asset-allocated portfolio that matches their risk tolerance and investment strategy. Slavic Mutual Funds offers three distinct portfolios for aggressive, moderate and conservative investors. The portfolios are balanced once a year to maintain targeted risk levels.
Client Profile
Generally, a company is a good 401(k) candidate if it has ten or more eligible employees, who annually earn an average of $25,000 or more. Some groups, such as medical or legal practices or smaller groups in which the owner earns very high wages compared to a support staff, may also be good candidates, if there is a good matching or profit-sharing employer contribution or "Safe Harbor" provision.
Payroll-Deducted IRA
If a company does not elect the Safe Harbor provision and has sparse participation for payroll deductions, an IRA may be a good choice. Payroll-deducted IRAs are available to all Employers Resource employees, even if the work site employer chooses not to adopt the Employers Resource 401(k) Plan. Employees may set up a Traditional, Education or Roth IRA account. Contributions to the account are made through after-tax payroll deductions processed by Employers Resource.
Tax Advantage
The 401(k) Tax Advantage Pre-Tax Contribution
All contributions to your 401(k) plan are made in pre-income-tax dollars. Your contributions are subject to FICA tax, but not to income tax. Depending on how much you contribute, this can mean hundreds - even thousands - of dollars in tax savings each year. You are allowed to defer up to $15,500. In addition, participants age 50 and over may make a "catch up" contribution to the plan in the amount of $5,000. (Highly compensated employees - employees who earn over $100,000. annually - and company owners may have lower limits.)
The Tax You Do Pay
You pay tax as you begin to take money out of your plan when you retire. At retirement, you will probably be in a lower tax bracket than you were during your peak earning years. So, you would pay significantly less tax overall. However, if you qualify to take money out of your plan before age 59-1/2, you must not only pay income tax on it at that time, but also pay a 10% penalty as well. (Non-hardship distributions are not permitted while you are still employed by the PEO and/or your work site employer.)
Tax-Deferred Growth
Like the contributions you regularly make to your 401(k) plan, the growth of your investment is not subject to tax. The 15% to 39% tax you pay on your earnings each year is eliminated in the 401(k) because it is a tax deferred investment.
The Power of Long-Term Compounding
The chart on the previous page illustrates the long-term effect of different rates of return and compound growth. It uses an initial investment of $5,000 with annual contribution of $2,400. Assumed rates of return are 4%, 7%, 10%, and 12%.
Plan Expenses
The Employers Resource 401(k) Plan is one of the greatest values in the employee leasing arrangement. Typically, the high costs of administration makes the 401(k) impractical for most small-to-medium-sized businesses. The design, scale, and efficiency of the Employers Resource 401(k) Plan allows you to offer a retirement program at a fraction of the cost required to establish an individual plan. The cost of the plan essentially consists of two types of fees: asset fees, which are based on the total dollar amount of the plan; and administration fees, which pay for the compliance, tax reporting, and record keeping of the plan. The quarterly plan asset fee is 0.0750%.
Portability of Assets
The plan assets of the 401(k) plan are fully "portable," if the adopting company decides to terminate its service agreement with Employers Resource and move all plan assets. However, individual participants may only receive a distribution upon leaving both Employers Resource and the work site prior to age 591/2.
Existing Retirement Plans
The Slavic group of companies and Employers Resource will merge 401(k) plan assets from most individual plans and Multiple Employer Employers Resource plans. The plan sponsor must provide documentation required for approval of the plan merger. There is a onetime employer charge of $350 plus $3 per participant for a plan merger.
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