Reducing 401(k) fiduciary liability
Companies seeking to reduce their fiduciary liability for 401(k) plan sponsors today is paying excessive fees from plan assets. When 401(k) plan administrator’s fees are paid from a company business bank account not the plans investment assets, any potential liability for overpaying these fees is eliminated.
Lowering income taxes
Employers who decide to pay 401(k) administration fees are from the plans assets are not tax-deductible to the business. On the other hand when a company pays them they reduce the owner’s taxes as a business expense. For companies who start up a 401(k) plan that is brand new, these fees may even qualify for a tax credit that could add up to $500 for each of the first 3 years of your plan. Plan sponsors qualify for this credit when:
- A business has 100 or fewer employees who received at least $5,000 in compensation in the prior year.
- They have at least 1 employee within the plan as a participant defined as a non-Highly Compensated Employee.
- The company has covered the same employees within a different retirement plan for more than 3 years.