Frequently Asked Questions

What are the benefits of a 401(k) plan?

Offering your employees a 401(k) plan helps recruitment, enhances morale since there is a good savings plan in place, and employees receive considerable tax savings per year. Also, any employer contributions are deductible on the employer’s federal income tax return.

How much can I save tax free in a 401(k) plan?

Employee 401(k) contributions for plan year 2021 will once again top off at $19,500 with an additional $6,500 catch-up contribution allowed for those turning age 50 or older.

How quickly can you set up the plan?

We can set up a new plan that does not have any assets in about 2 weeks or less depending upon the 401(k) providers that you choose. An existing plan with assets will take about 4 to 6 weeks.

What are average expenses for 401(k) plans?

Larger plans usually have lower expenses than smaller plans attributed to more assets and participants.  According to data published from the 401(k) Book of Averages on January 10, 2020, a company with 2,000 employees can expect to see an average 0.78% total expense ratio. In comparison, small businesses plans with 50 employees have an average expense ratio of 1.26%. At 25 employees, it’s 1.35%. However, Transparent 401K’s 401(k) plans are very cost effective since we negotiate 401(k) plan expenses with various 401(k) providers and offer institutional low cost active and index funds.

Can I avoid getting a cookie cutter menu and /or choose my own funds?

Transparent 401K’s retirement plans offer a flexible fund selection where our firm will monitor a selected list of funds with the option for self-directed brokerage (the participant can select from an unlimited fund and/or stock selection). This is another benefit of working with our firm.

What are good expense ratios for mutual funds?

The current average expense ratio for actively managed mutual funds is between 0.5% and 1.0% and typically goes no higher than 2.5%, For passive index funds, the typical ratio is closer to 0.2%. Transparent 401K uses institutional funds that have the lowest expense ratios for both index and actively managed funds.

Where is my money held?

Your money is kept with a custodian. Some custodians that we work with include Matrix Trust, TD Ameritrade Trust, and Charles Schwab.

What is a Safe Harbor 401(k) plan?

A Safe Harbor 401(k) plan generally satisfies the non-discrimination rules for elective deferrals and employer matching contributions. For a 401(k) plan to be considered a Safe Harbor plan, employers must satisfy certain contribution, vesting, and notice requirements.

What if I can not afford a match?

We have a lot of new start-up plans that do not currently match. In order to help them pass the required non-discrimination testing at the end of the year, we encourage automatic entries, training employees on the benefits of joining the 401(k) plan, and often limiting the highly compensated group to the top 20%.

Is Transparent 401K a record keeper or administrator?

Transparent 401K is a Registered Investment Advisory Firm and offers Third-Party Administration and record keeping services though various 401(k) providers that we recommend. Many of our partners have been in business for over 50 years or more and administer thousands of plans.