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  • In March of 2019, Governor Phil Murphy signed the New Jersey Secure Choice Savings Program Act to close the retirement savings gap. This Act created the Secure Choice Savings Program which was designed to provide a private path for employees to save for retirement. This means that certain employers are required to establish a payroll deposit retirement savings plan that permits eligible employees to take part in the program.

    Although the implementation of the program remains in the works, the new website is now operational as of April 2022. More information is expected soon which will include the next steps concerning how to implement this program in your business. To keep up to date on this Act, visit their website today.

    Employers Subject To The Act:

    The Secure Choice Savings Program applies to any person and entities that are engaged in a business, industry, profession, trade, or other enterprise within the state of New Jersey that:

    • Have not employed fewer than 25 employees in the state the previous calendar year
    • Have been in business for at least two years
    • Have not offered a qualified retirement plan in the past

    Qualified Retirement Plans:

    There is a common misconception that plans must be offered as a 401(k). However, there are a variety of qualified retirement plans offered to an employer, to avoid complying with the Act. These include Sections: 401(a) and (k), 403(a) and (b), 408(k) and (p), 457(b), or a plan sponsored by a PEO.

    How Employers Will Comply:

    To comply, covered employers must follow the steps below: 

    • Establish a payroll deposit retirement savings arrangement no more than nine months after the Board opens this program for enrollment. Each employee that will enroll in the program will be able to choose their individual contribution level.
    • Each employee who has not opted out will be automatically enrolled in the program.
    • Deposit deductions from employees’ payroll into the program.

    As this new Act rules out, employers are permitted to contract with a third party. A third party means partnering with a Professional Employer Organization like GMS, who will perform the tasks listed above on behalf of the employer.

    What This Act Means for Employees:

    Employees that were hired more than six months after the Board opens the program for enrollment and have not opted out, will be automatically enrolled. New employees who are eligible to enroll, will be automatically enrolled. New employees will be eligible to enroll annually. Employers are required to have an annual open enrollment period where eligible employees are able to change their elections under the Program. That also means that any employee who opted out in the previous year will be able to opt in during the new enrollment period.

    Penalties for Employers:

    Any employer who fails to enroll any employee without a reasonable cause in a timely manner is subject to the penalties listed below:

    • A written warning for the first calendar year in which a violation occurs.
    • For the second calendar year, there will be a $100 fine when a violation occurs.
    • For the third and fourth calendar year, there is a $250 fine for each employee who was not enrolled in nor opted out of participation in the program.
    • For the fifth calendar year and the years to follow, there will be a fine of $500 for each employee who wasn’t enrolled in nor opted out of participation in the program.
    • There will be a first offense penalty of $2,500, and a $5,000 fine for the second offense and each offense following when the employer collects employee contributions but fails to remit any portion of the contributions to the fund.

    Be Proactive And Partner With A PEO Today!

    As the board is still working on the implementation of this program, employers have time to figure out a game plan for their business. When partnering with a PEO like GMS, our experts will keep you up to date on these changes and assist in the process of enrolling your employees into this program. Offering a retirement plan is more important than ever to retain quality employees. However, at GMS, we know how challenging it can be to decide which plan is best for you and your employees. Are you looking for proactive ways to ensure your business’ success? Contact us today to learn more! 

  • New For 2022: 401(k) Contribution Limit Rises   

    The IRS announced the 2022 cost-of-living adjustments (COLAs) for employer-sponsored retirement plans. Both employee and employer limits will increase due to the continued rise of inflation. Employees under the age of 50 will now be able to max out their contributions at $20,500. This is a $1,000 increase from the cap in the years 2020 and 2021. Employees aged 50 and older will continue to be able to contribute an extra $6,500 in catch-up contributions, which has been unchanged for the last two years. 

    In addition, the employer-plus-employee contribution limit will increase to $61,000 in 2022, up by $3,000 from 2021. This is particularly beneficial for employers that make an annual profit-sharing contribution. 

    When dealing with the annual limit as a contribution goal, not all employees will be able to fund the maximum amount. However, if employees consider raising their contribution rate by even 1% each year, they will see a dramatic impact at retirement. “If your employer offers a matching contribution, it’s important to try and contribute at least that percentage as a minimum,” said Tom Smith, Manager – Executive & Retirement Benefits for GMS. “Also, striving to increase your personal deferrals each year in order to eventually reach those annual contribution limits will help increase your odds for a comfortable retirement.” 

    Employees that do want to max out their contributions should check in with their employer about reaching the annual limit prior to year-end. If this occurs, employees may lose out on employer matching contributions tied to each paycheck. Certain plans allow for a year-end “true-up” contribution, so it’s best to know your company’s 401(k) plan provisions to ensure you are receiving the maximum employer match.  

    It can be challenging for both the employer and the employee to comply with these limits. Employers must ensure that their payroll systems do not accept contributions once the limit is reached. Employees also must remember that the annual limit applies to the total contributions between all 401(k) plans. Since the contribution limit is an aggregate total, employees who work at multiple jobs over the course of a year and contribute to multiple different 401(k) plans will need to self-police how much they are contributing to each plan, so that they do not contribute more than the IRS limit. 

    How GMS can help:   

    Partnering with a CPEO (Certified Professional Employer Organization) like GMS can allow you to offer 401(k) and profit-sharing plans for your employees. It’s no secret offering retirement plans is important to recruit and retain quality employees, but they do come with a lot of complexity and risk. GMS takes on the role of the fiduciary to ensure employers maintain compliance, which means that business owners do not have to waste time trying to make sense of their legal responsibilities. When you work with GMS, we will take care of the administrative tasks, auditing, and plan management.  

    Interested in cutting costs and reducing stress? Contact GMS today to get your customizable 401(k) or profit-sharing retirement plan started. 

  • New Jersey Secure Choice Savings Program   

    State-mandated retirement plans are increasingly popping up across the country. Currently, California, Illinois, Massachusetts, Oregon, and Washington already have retirement legislation active. Other states, such as Colorado, New Jersey, New Mexico, Seattle, Virginia, and Vermont have similar legislation passed. While their requirements are not yet active, implementation is scheduled – some beginning at the end of this year, and others not taking place until 2023. Finally, the states of Connecticut, Maryland, Maine, and New York also have legislation passed – but no clear implementation dates have been outlined.  

    Why Require A State-Ran Retirement Plan? 

    According to the National Institute of Retirement Security, 57 percent of working-age households have no retirement assets. Moreover, of those that do, only half an adequately prepared for a comfortable retirement – thus relying on Social Security for half of their retirement income. It’s no surprise that the looming retirement savings crisis exists for these reasons. 

    How Do These Plans Work? 

    There is a common misconception that plans must be offered as a 401(k). However, the majority of these plans will serve as Roth IRAs, which have a few key differences with a 401(k): 

    • 401(k)s have a higher annual contribution limit vs Roth IRAs 
    • Roth IRAs are after-tax, whereas 401(k)s offer pre-tax & after-tax contribution options 
    • Employers cannot match Roth IRA contributions, but can match 401(k) contributions 

    California, Illinois, New York, and Oregon are offering these Roth IRAs.  

    The New Jersey Secure Choice Program:  

    NJ Secure Choice is a state-sponsored retirement plan, aimed to close the retirement savings gap. The Program allows employees to contribute a portion of their pretax earnings to an individual retirement account (IRA) via payroll deductions. They are automatically enrolled at a 3% contribution rate, unless the employee changes said rate or opts out. Kulzer & DiPadvoa P.A. explained, “The program gives workers in New Jersey the option to invest the amounts withheld by their employers and remitted to New Jersey in a state-administrated Individual Retirement Account”. Contributions are capped at $6,000 annually, as required by IRS guidelines.  

    This Program applies to for-profit and non-profit employers in the public sector who have 25 or more employees and have been in business for more than two years. While businesses with fewer than 25 employees are not required to participate, they may choose to do so.  

    As it currently stands, this law is set to begin in March 2022, after a brief extension was granted due to COVID-19. Roll out is expected to take nine months – employers thereafter will have a grace period of 12 months if needed. This program imposes penalties on non-complying employees with a warning of up to $500 per employee.  

    Three Subjects Employers Must Follow Are:  

    1. Notice Requirement: For the first six months the board will have a process in which employers can register for the program and employers must have a packet to give to their employees that was prepared by the board.  
    2. Payroll Processes: Employers must have a retirement savings arrangement more than nine months after the board opens for enrollment. Any employees must be opted in unless they have opted out of the program. 
    3. Enrollment Of Employees: No later than three months following the date of hire, employers must enroll an employee hired more than 6 months after the Board opens the Program for enrollment.  

    GMS believes that employees should have options to receive a great retirement plan no matter how big or small your wage is. Our office in Cherry Hill, New Jersey is ready to help small businesses receive the best plan catered to their needs. We know that figuring out which plan is best for you can be stressful but offering a retirement plan is important when recruiting and retaining quality employees.  

    To learn more about our savings plans, contact us today.  

     

  • No matter the size of your company, a 401(k) can play a pivotal part in a competitive benefits package. Only 48% of businesses offer some form of retirement savings plan for their employees, which makes starting a 401(k) plan all the more enticing for an enterprising business owner.

    Of course, it’s not always clear how to set up a 401(k) or profit sharing plan for your small business. Offering a retirement saving and investing plan takes a few steps, but the results can have a major impact on both your employees and your company. It’s time to break down what it takes to set up the right 401(k) for your company.

    Why Should My Small Business Offer a 401(k) Plan?

    Before you set up a 401(k) for your small business, it’s important to know why it makes sense for your company. There are several key reasons to offer this sought-after benefit.

    Attract and retain talent

    Arguably the most obvious benefit of offering a 401(k) plan is that it makes your business more competitive in the hiring market. Charles Schwab reports that 88% of job seekers named a 401(k) plan as a “must have” benefit when considering a position. That desire for a retirement plan not only makes your business more attractive as a landing spot, but also adds another way to keep your current employees satisfied.

    Improve your employees’ morale

    A 401(k) can stand as more than just a financial benefit. The act of giving your employees a retirement savings plan serves as a symbol that you value their future with your company—and beyond. 73% of Americans named their finances as the top cause of stress in their lives. By offering a 401(k), you can show employees that you care for their quality of life, which can help make them more productive and appreciative.

    Tax-deductible perks

    Another potential advantage of offering a 401(k) plan is that they can help out during tax season. First off, the IRS states that any “elective deferrals and investment gains are not currently taxed,” which means that you and your employees can enjoy tax deferral until those funds are distributed. Employers can also deduct any matching contributions up to the annual limit on their federal income tax return.

    The Four Steps for Setting up a 401(k) for a Small Business

    Once you’re ready to establish a 401(k) plan, there are some initial actions you’ll need to take for your business. This four-part process will help you go from identifying the right type of plan all the way through executing your new 401(k).

    Step One: Choose A Plan That’s Right For You

    Once you decide to offer a 401(k), it’s time to determine which type of plan is right for your business. There are many types of plan designs that offer different contribution features or advantages. This amount of flexibility allows you to determine how contributions work, create eligibility requirements and vesting schedules, and decide on whether or not to contribute to these plans. These plans include:

    • Traditional 401(k)
    • Safe harbor profit sharing 401(k)
    • Simple 401(k)
    • Roth 401(k)

    Traditional 401(k)

    The traditional 401(k) plans are arguably the most flexible option available. The plans give employers a lot of freedom in terms of profit sharing options, vesting schedules, and more. Through a traditional 401(k), employers can:

    • Contribute directly to all participants’ plans.
    • Match employees’ deferral amounts (or a portion of the deferrals).
    • Provide both contributions and matches.
    • Offer none of the above.

    Any contributions employers make can be subject to a vesting schedule, giving employers added flexibility. These schedules determine how long an employee must work for your company in order to keep part or all of your company’s contribution.

    Another key part of traditional 401(k) plans is that they are subject to non-discrimination tests with the IRS. These tests are designed to prevent businesses from favoring certain employees over others. Every year, the IRS will test traditional plans to see if the deferral percentage and actual contribution percentage don’t favor highly compensated employees key employees such as an owner. As such, you’ll need to meet these testing requirements to prevent your 401(k) from failing IRS guidelines.

    Safe harbor 401(k)

    Safe harbor plans are similar in nature to traditional plans, with the biggest difference being that safe harbor plans are not subject to the IRS annual contribution testing. In exchange for eliminating these non-discrimination tests, employers are required to make contributions to employees’ plans. In addition, many safe harbor 401(k) plans require these mandatory contributions to fully vest when they’re made.

    SIMPLE 401(k)

    If your business has fewer than 100 employees, you can also opt to offer what’s called a SIMPLE 401(k). This type of plan is also exempt from nondiscrimination testing, but does limit some of the flexibility of other plan types. For example, your business cannot offer any other types of plans and all contributions must be fully vested. SIMPLE plans also require employees to make one of the following types of contributions.

    • A matching contribution up to 3% of each employee’s pay.
    • A non-elective contribution of 2% of each eligible employee’s pay.

    Roth 401(k)

    Another option available to business owners when setting up a 401(k) is a Roth account. Roth accounts function much in the same way as a regular 401(k), except that all contributions are taxed before they’re deposited. The main advantage of this type of plan is that account owners don’t need to pay any taxes on withdrawals, including all of the investment earnings.

    Step Two: Find the right team for your 401(k) plan

    When learning how to set up 401(k) for a small business, an essential requirement is partnering with the right providers for your business. There are many different aspects of a 401(k) plan that makes it nearly impossible for business owners to do everything by themselves. That’s why these plans can involve a variety of partners, including:

    • Recordkeepers in charge of processing withdrawals and tracking contributions, earnings, losses, plan investments, expenses, and benefit distributions.
    • Advisors who help you select and maintain plan investments and potentially oversee the money management of the plan.
    • Plan administrators who handle document preparation, transaction approval, compliance filing, and other behind-the-scenes tasks.
    • Payroll providers who tie your payroll process to plan contributions and paycheck deductions.

    With the right team, business owners can successfully implement a 401(k) plan. However, that doesn’t necessarily mean that multiple providers for each role. Small businesses can choose to work with multiple vendors or find a partner like a Professional Employer Organization that can oversee and manage most, if not all, of the setup and administration for your plan.

    Step Three: Start Your New 401(k) Plan

    Now that you have the plan type and partnerships in place, it’s time to make your 401(k) official. The IRS requires businesses to take some basic actions to officially establish and run a 401(k) plan.

    Create a plan document

    Every 401(k) plan needs to start with a written document. According to the IRS, this document should serve as “the foundation for day-to-day plan operations.” In short, the document should lay out the various rights, benefits, and features of your plan. These details include:

    • When your employees are eligible for the plan.
    • A breakdown of profit sharing and employer matching (if applicable).
    • Guidelines on vesting schedules.
    • The process for handling distribution.
    • Relevant contact information for providers and internal company resources.

    Set up a trust

    The next basic action involves having any plan assets held in a trust. This step ensures that these assets only benefit the participants of the plan. Your business must assign at least one trustee to the plan. This individual or group is tasked with handling plan activities such as contributions, distributions, and plan investments.

    While this step may seem simple, it’s critical to have the right trustee in place. Trustees’ decisions will have a direct impact on your plan’s financial health, so you’ll want a person or people in place who you can trust with the financial integrity of the plan.

    Record maintenance

    Businesses are also required to set up an accurate recordkeeping system for their plans. This system should track and properly attribute several key details, including:

    • Contributions
    • Earnings and losses
    • Plan investments
    • Expenses
    • Benefit distributions

    Another reason recordkeeping systems are important is that they can help your business stay compliant with the Federal government. Every year, businesses must prepare and file an annual return/report for their 401(k) plans. The recordkeeping system makes it easier for you and your team to prepare these reports.

    Inform participants

    The final action for setting up your small business’ 401(k) plan is to notify eligible employees about your plan. This information should include key details about your plan’s benefits and requirements. These efforts should include providing employees with a summary plan description (SPD) that shares key information and discloses fees. You can also opt to provide additional information, such as education about the advantages of a 401(k) plan and employees can get the most value out of them.

    Step Four: Ongoing Maintenance

    Setting up a 401(k) for a small business is a big accomplishment, but it’s not the end of the process. An ongoing 401(k) plan requires additional work to keep it successful and compliant. These responsibilities include:

    • Regular plan maintenance
    • Ongoing nondiscrimination testing
    • Government filings
    • Employee assistance

    Find the Right Partner to Help You Set Up and Maintain Your Small Business’ 401(k)

    Let’s face it – setting up and maintaining a 401(k) plan can be an overwhelming, time-consuming process. That’s why GMS partners with small businesses to offer an attractive 401(k) or profit sharing retirement plan without the added time and hassle. GMS not only saves you time by managing your setup and ongoing maintenance, but also reduces plan costs by leveraging the group buying power as a PEO.

    Ready to set up a fully customizable retirement savings plan for your business? Contact GMS today to talk to our experts about how we can support the financial health of your employees through our large-scale 401(k) plan.

    Already a GMS client? Sign up for a 401(k) through GMS now through Aug. 31 and we’ll waive the admin fee for the rest of 2021-22! Reach out to your account manager or Tom Smith (TSmith@groupmgmt.com) to set up an appointment.

  • I receive this question very often, especially at the beginning of each year. The IRS requires any company with a 401(k) plan to conduct annual compliance testing.

    The testing is conducted after the plan’s year-end. For most plans, this is 12/31.

    Why is plan nondiscrimination testing important?

    According to Transamerica Retirement Services, “Nondiscrimination testing mandates were added to the rules governing 401(k) plans to ensure that these plans are not designed to economically benefit only highly-paid personnel, but are fair for all employees. Not meeting these mandates, or failing to correct any failed year-end compliance test, could mean substantial penalties and possibly even disqualification of the plan’s tax-exempt status.”

    Simply put, 401(k) testing is required to make sure all employees benefit from the plan equally, regardless of their income level. When plans aren’t tested or fail the test, or when plan problems aren’t corrected, the company can be penalized.

    How does 401(k) testing work?

    401(k) testing involves examining the benefits received by all employees. For the purposes of these tests, employees are grouped into three categories:

    • Key Employee – anyone with at least a 5% ownership stake in the company (either last year and/or current year) or a direct relative (spouse, parent, or child) of someone with a 5% ownership stake.
    • Highly Compensated Employee (HCE) – for 2013 testing, anyone who has made $115,000 in 2012.
    • Non-Highly Compensated Employee (NHCE) – anyone that doesn’t fall into the other two categories.

    *Please note that all Key Employees are also considered Highly-Compensated Employees, but not all Highly-Compensated are considered Key Employees.

    What do the tests entail?

    These two tests are probably the ones that effect employers the most.

      1. Average Deferral Percentage Test (ADP)

    This test takes the average deferral rate of the HCE and compares it to the average deferral rate of the NHCE. The HCE can only contribute so much more than the NHCE.

    If you are a HCE and contribute more than the maximum allowed, then you could be subject to a refund or the company might have to make contributions into the NHCE accounts.

      1. Top-Heavy Test

    This test is a little different, in that it is always conducted for the upcoming year. The numbers used are from 12/31/12 to determine if you are Top-Heavy for 2013.

    Key Employees cannot control more than 60% of the entire plan’s assets. If they do, the company will have to make up to a maximum of a 3% non-elective contribution to any eligible employee of the company—even those who aren’t participating in the plan.

    How do I make sure I’m abiding by the rules?

    You need to make sure you are getting the proper guidance from your retirement provider. You also need to take ownership of your plan. Additional Plan Data forms are extremely important, because things change from year to year. It’s important to have the most up-to-date information so that your retirement provider can correctly conduct your testing.

    GMS, as a PEO company, is able to offer clients our 401(k) plan. We assist with administering the testing. Instead of just handing you the results, we will go over them and provide advice. Every company is in a different situation.

    Are you getting the right guidance on your 401(k) plan?

    “Numbers and Finance,” © 2011 Ken Teegardin, used under a Creative Commons Attribution-Share Alike 2.0 Generic License.

  • When you’re a business owner, a 401(k) or profit sharing plan is a must to help attract and retain great employees.

    While you may be the owner of a company, you’re likely not an expert on the legal responsibilities of offering these plans to your employees. Most business owners are too focused on running their company to provide an adequate amount of attention on benefits administration.

    Your benefits don’t have to be a hassle. A Professional Employer Organization (PEO) can step in and cut costs, save time, and offer customizable plans for your company.

    GMS can help business owners offer appealing 401(k) and profit sharing plans.

    Saving Time on 401(k) and Profit Sharing Plans

    You may not be an expert on 401(k) and profit sharing plans, but the people who work for a PEO are. By working with a PEO, you won’t waste your valuable time trying to make sense of something that you likely don’t have much experience. Plus, management fees are low, so you won’t have to break the bank to get a professionally managed plan.

    A PEO can work to set you up with a customizable plan that fits what you and your employees want. That means that you can spend your time on ways to build your company instead of getting headaches trying to wrap your head around the legal responsibilities of benefits administration. 

    Retirement Guide

    Work with GMS for a Customizable 401(k) and / or Profit Sharing Plan

    As a PEO, Group Management services works to offer retirement plans that will strengthen your business. GMS can help you establish:

    • 401(k) eligibility requirements
    • Vesting
    • Tax-deductible matching
    • Profit sharing contributions

    We’ve got the experts to help you save time and money on your benefits planning. Contact us today about retirement planning that will help you attract and retain quality employees.

  • Americans work the majority of their lives with the hope of one day retiring and enjoying the fruits of their labor. Unfortunately, more and more people have to work well into their golden years without any end in sight. This is especially true for people that work for small businesses for the bulk of their career.

    Image of an employee with no money. Learn about the importance of a 401k and retirment plan for small businesses.

    Retirement Guide

    Small Business Retirement Planning Struggles

    According to a recent Crain’s article, “At companies with fewer than 50 workers, not even half the employees have access to a 401(k) or pension, according to the Bureau of Labor Statistics.” Small business owners are having trouble finding the time and money to create sustainable retirement plans for their employees.

    In a recent Business and Financial Planning Survey by CNBC and the Financial Planning Association, “42 percent of owners polled said that developing a retirement plan and exit strategy was their most pressing financial challenge, and 47 percent of advisors questioned said that only a fifth of their small business clients had any succession plan at all.”

    Recent studies show the huge advantages held by large corporations with economies of scale, in being able to offer affordable plans for a greater employee base. Between finding an affordable plan and a third-party to administer that plan, small business owners are struggling to keep up, which puts them at a disadvantage when it comes to recruiting talent. 

    These issues have led to several states looking into different avenues to help people save for retirement, according to Crain’s. “California, Maryland, Oregon, Illinois, and Connecticut are all setting up portable individual retirement accounts that can follow workers through their careers. Each state is requiring employers either to offer a retirement plan or to sign workers up for state-run, automatic IRAs.”

    Policies are being discussed in hopes of helping small business owners remain competitive in the recruitment of talent, while still giving employees the flexibility of opting not to make contributions to a retirement plan if they choose. 

    Retirement Planning for Small Businesses

    One great option small businesses can explore, is partnering with a Professional Employer Organization like Group Management Services. We have partnered with over 1,000 businesses in outsourcing Payroll, Human Resources, Risk Management, and Benefits like 401(k) plans. Due to the volume of companies we work with, we are able to offer an affordable plan on the same level as large companies. Contact us today to learn more about how we can help your business with retirement plans.

  • It can be very difficult for small business owners to compete with big companies when it comes to 401(k) plans. Due to their size, large corporations can use economy of scale to their advantage and offer attractive retirement plans that are more affordable due to the size of their employee base. 

    Small business owners don’t have hundreds of employees to their name, but that doesn’t mean that they can’t have access to economies of scale through other resources. 

    How a PEO Can Provide New 401(k) Advantages

    Small business owners are typically subjected to a lot of costs when they manage their own 401(k) plan, which can scare off some employers. The Pew Charitable Trusts conducted a survey with small- and medium-sized businesses that don’t offer a 401(k) to employees and found that 71 percent of these business claimed that the associated expenses played a role in their decision to forgo a retirement plan. 

    Without some help, those costs can quickly add up over time. There can be a lot of set-up fees and other miscellaneous charges to maintain plan documents. Most employers are also not experts of retirement planning, so they also need to hire a Third-Party Administrator to handle their 401(k) plan for them.

    Small businesses aren’t going to match the output of a big corporation. With a Professional Employer Organization like Group Management Services, they don’t have to. Since GMS represents over 1,000 different companies, we can provide companies with the same types of benefits that the large corporations get due to economy of scale. 

    Our Multiple Employer Plan creates a level of buying power that a lot of small businesses never get to have. That power can lead to a more diverse investment menu than they might be able to get on a single employer plan, as well as additional perks. We also handle 401(k) Plan administration in house with the aid of Transamerica, which allows us to cut down on the costs that employers would typically pay a Third-Party Administrator.

    The Multiple Employer Plan also relieves employers of many of the responsibilities attached to providing substantial fiduciary support for their plan. That includes the following:

    • Making sure that contributions get deposited in a timely fashion.
    • Selecting and monitoring the investments offered on the plan. We conduct quarterly meetings with our Financial Advisors to do our due diligence on the funds offered on our platform.
    • Making sure that plan documents are maintained and keeping our clients compliant.
    • Filing one 5500 to the DOL with our clients listed.
    • Offering access to a dedicated financial adviser and educational material. 

    Retirement Guide

    Use Economy of Scale to Your Business’ Advantage

    Economy of scale can help your business save big while providing a retirement plan your employees want. Contact us today to talk to one of our experts about our 401(k) plans for small businesses.

  • The fiduciary rule has had a bumpy ride in the past few years. After initially going into partial effect in June of 2017 and targeting Jan. 1, 2018 for a full rollout, the move to have all financial professionals who work with retirement plans follow the same fiduciary ethics and standards was postponed until July 1, 2019. Now MarketWatch reports that the Fifth Circuit Court “struck down the Labor Department’s fiduciary rule” in a split decision Thursday, March 15, 2018.

    This may not be the end of the fiduciary rule, however. According to Forbes Contributor David Trainer, the fiduciary rule may still make an impact even after being struck down. Trainer writes “While the ruling could end the Fiduciary Rule as law, it cannot erase the awareness the DOL [Department of Labor] raised, nor can it stop market forces leading the business towards a more ethical place.”  

    So, what does this mean for business owners? The fiduciary rule wasn’t designed to directly impact you as an owner, but it does affect the financial advisors connected to your business. Here’s a quick rundown of how the fiduciary rule can still make an impression on financial advisors and what that may mean for your business.

    Financial advisors for a small business 401(k) plan.

    What It Does

    According to Investopedia, the fiduciary rule “expands the ‘investment advice fiduciary’ definition under the Employee Retirement Income Security Act of 1974 (ERISA).” In simpler terms, it was designed to give financial professionals who work with retirement plans or offer retirement advice the same legal and ethical standards of a fiduciary.

    With this rule in place, retirement advisors would have more responsibility placed on them. According to Investopedia, the rule would leave “no room for advisors to conceal any potential conflict of interest,” which would include stating “all fees and commissions for retirement plans and retirement planning advice must be clearly disclosed in dollar form to clients.”

    Even though the rule has been struck down for now, it may not be dead quite yet. Trainer notes in his Forbes piece that the DOL could start on a new rule addressing the matter or request a stay in the Fifth Circuit Court’s ruling. The Wall Street Journal reports that the U.S. Securities and Exchange Commission is also “close to proposing rule requiring new disclosures on financial advice.” Even without going into effect, Trainer suggests that the fiduciary rule has raised awareness of fiduciary responsibility for owners and investors.

    What It Means for Owners

    Fiduciary responsibility can be intimidating, especially if you aren’t well versed in the legal responsibilities associated with 401(k) management and other financial decisions. The push for the fiduciary rule can help ease this burden by placing more of this responsibility on your financial advisors. However, it may lead some advisors to pull away from managing 401(k)s for businesses because it places more scrutiny on them. 

    Fortunately, there are other options that can take a lot of the fiduciary responsibility off your plate. By having a Professional Employer Organization like GMS manage your 401(k), you’re able to offload a lot of the financial risks associated with the plan. This includes financial transaction risk, as we’re responsible for making sure that money gets remitted to the financial institutions. We deduct that money out your payroll and send it directly to Transamerica, our record keeper. We’re also responsible for maintaining plan documents and making sure they stay compliant. If something happens, like an IRS restatement, we’re the ones responsible for applying it, not you.

    The exact form of the fiduciary rule may change, but financial responsibility can always be problematic for an owner. Contact GMS today to talk to one of our experts about how we can help your business manage its 401(k) plans so that we can take on that responsibility for you. 

  • Retirement plans are one of the most valuable employee benefits offered by organizations today. According to the Society for Human Resource Management (SHRM), the vast majority of workers say having a retirement plan is critical to their overall job satisfaction. Perhaps that’s why this benefit is such a deal breaker for job hunters and one of the main reasons why so many workers stay with their current employers. 

    It can be challenging for small businesses, however, to manage the administrative costs and compliance requirements associated with offering retirement savings plans. Only 53 percent of small-to-mid-sized businesses offer a retirement plan, with approximately 38 million private-sector employees without access to one through their employers.

    The good news is that may be about to change. In July 2019, the Department of Labor (DOL) clarified the definition of “employer” within the Employee Retirement Income Security Act (ERISA) in sponsoring a multiple employer contribution pension plan. In establishing the ‘final rule’, which goes into effect Sept. 30, 2019, the DOL has made it easier and more cost-effective for small businesses to offer retirement plans to employees through Association Retirement Plans (ARPs).

     Retirement savings.

    What is an Association Retirement Plan?

    Per the final rule, ARPs allow small and mid-size businesses to band together to offer joint 401(k) retirement plans. By using the purchasing power of the combined businesses, they can bargain for lower administrative and investment fees that would otherwise prevent them from offering retirement savings plans.

    “Many small businesses would like to offer retirement benefits for their employees but are discouraged by the cost and complexity of running their own plans,” Acting Secretary of Labor Patrick Pizzella, said in a statement. “Association Retirement Plans offer valuable retirement security to small businesses’ employees through their retirement years.”

    According to the DOL’s final rule, ARPs can be offered by associations of employers in a city, county, state, multi-state metropolitan area, or nationwide industry. ARPs can also be sponsored through a Professional Employer Organization (PEO), which is a company that provides comprehensive HR services for businesses. While many PEOs have been sponsoring retirement plans for some time, this final rule provides the validation needed to continue doing so.

    What it Means for Small Business Owners

    Prior to this rule, such retirement plans were limited to employers with an affiliation or connection, such as a shared owner or being members of an industry trade group. However, these changes now mean that, for example, a landscaping company and a marketing agency located in the same area could create a joint retirement plan.

    With a more cost-effective solution, small business owners can reap the benefits of offering retirement plans, including:

    • Attracting quality talent.
    • Improving employee satisfaction.
    • Reducing new employee training.
    • Retaining high performers.

    Additionally, businesses can also receive tax credits from the IRS for starting a retirement plan. 

    Retirement Plans Assistance

    Offering retirement plans is important to attracting and retaining quality employees, but it’s a benefit with a lot of complexity and risk. Need assistance? A PEO like Group Management Services (GMS) can help cut costs, reduce stress, and save time when it comes to establishing retirement plans. We can help you set up fully customizable plans to easily establish eligibility requirements, vesting, profit-sharing contributions, and more.

    In addition, GMS offers comprehensive services, including human resources, payroll, risk management, employee benefits, and more. Contact GMS today to request a consultation.