Q&A: How can I easily offer a retirement plan?

Nicolle Willson, Director of Retirement Consulting at Guideline
Apr 26, 2022

The AARP recently found that 48% of Americans age 55 and older have zero retirement funds at all. To combat this massive gap, some states will require employers to provide retirement plans for their employees. If your state requires you to offer a retirement plan this year for the first time, where do you start? […]

The AARP recently found that 48% of Americans age 55 and older have zero retirement funds at all. To combat this massive gap, some states will require employers to provide retirement plans for their employees.

If your state requires you to offer a retirement plan this year for the first time, where do you start?

Nicolle Willson, Director of Retirement Consulting at Guideline, shares what you need to know to choose the best plan for your small business and how to get started.

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On this episode, you’ll hear:

  • [00:30] What the 401K access gap is
  • [01:30] Which states have retirement plan deadlines in 2022
  • [02:45] Administration considerations
  • [03:30] Cost considerations
  • [04:30] Plan design considerations
  • [05:00] What to look for in a 401K plan


Welcome to pops the show that shows you how to shift from human resources, paperwork to people, operations for the new world of work. How by answering one question at a time

Today to help us answer your question. Here’s Nicole Wilson, Director of Revenue Consulting at Guideline. Hi, and welcome to the pops podcast. I’m Nicole Wilson. I had the retirement consulting team at guideline, a FinTech retirement platform. I am an attorney, a certified financial planner and a certified 401k professional.

I’ve been with guidelines since inception in 2015 and currently lead a team of experts. Before we get into the main discussion topic, I want to quickly discuss the 401k access gap. So I recently came across an article where ARP highlighted the fact that 48% of Americans, 55 and older don’t have any retirement funds at all.

This is what we refer to as the retirement crisis here at guideline. And it’s something we are trying to solve. Do. So we, aren’t the only ones who recognize this massive gap. The government has begun to get involved on both a federal and a state level. On the state level. We have certain states beginning to roll out mandates, requiring businesses over a certain number of employees to offer some sort of retirement plan.

This can be either a state offered retirement plan or a private market option like a 401k. So our main question for today is if your state requires you to offer a retirement plan this year for the first time, where do you start? So to begin, let’s start with the states that currently have active programs with deadlines in 2022.

These are California, Illinois, and Oregon, which all maintain auto IRA programs as the preferred state. Note that each of these states has already required businesses with a certain number of employees to either register with the state IRA program or set up a private plan. However, they are all expanding the requirement to businesses with a lower employee count this year.

So for Illinois businesses with 15 or more employees must set something up by November 3rd. For California businesses with five or more employees must set something up by June 30th and for Oregon, they are expanding the requirement to the smallest businesses with four or fewer employees, sometime in late 20, 22.

I also want to mention the states that don’t currently have a program in place, but have high hopes to roll one out this year. These are Connecticut, Maryland, and New Jersey. So if you’re in a state where one of these deadlines impacts you as a small business owner, the first step is to understand your options.

What plan is going to be best suited for you and your employees? I want to talk about the three things that probably matter most to you. Administration costs and plan design. So first let’s talk about administration. The state option in general will require less administrative work than maintaining a private plan option like a 401k.

However, most of the work will be in the form of collecting and remitting contributions to your plan, every pay period. This can really be quite tedious. In contrast, when you have a 401k, the plan probably involves more administrative work overall, but you can hire a modern provider like guideline to do that work for a fairly low cost nowadays, which means you may actually end up doing less overall than if you went with the state.

So second let’s talk about costs. The state programs are generally going to be a no cost option to the business owner, but she must realize that this means employees are going to bear the cost. This employee cost comes in the form of an AUM fee or asset under management fee. This fee will take money from employee accounts as a percent of the account balance annually.

So the AUM fee for state programs can be quite high. For example, the Cal savers program charges up to 0.95% of assets annual. In contrast. If we look at, for example, guideline a 401k, we charge an average of 0.15% of assets annually to the participant. However, what guideline the business will have to pay a reasonable monthly charge to substitute for the administration costs.

Then finally, I want to talk about plan design. So state plans are Roth, IRA based, meaning their limits are lower and there is no immediate text of that deduction for employees and no flexibility for employees in plan design, 401k plans. On the other hand, they can be quite flexible. They allow business owners to get a lot more savings in for themselves and for their employees, as well as offer more flexibility with tax deductions.

So. Summarize state mandates. They’re actually a win for you and your employees. Retirement plans are great retention and attraction tool for keeping your employees as well as attracting top talent. And our retirement plan is a great way to keep your employees happy while promoting financial wellness at the state.

So guideline 401k is an option, uh, as an alternative to these state mandates to keep your company compliant. So what you should look for in your 401k framework, that I’m proud to say guideline offers affordability for both employers and employees, automation with payroll providers to ensure limited administrative burden to maintain your plan, a low cost yet high quality investment option or investment menu and fiduciary service.

So that’s it for today. Thank you for listening. Do you have a question for our experts? Click the link in the show notes, or if you’ve got other ideas and feedback about our show, send them to [email protected]

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