Author: Derren Burrell

The United States Small Business Administration establishes small business size standards on an industry-by-industry basis, but generally specifies a small business as having fewer than five hundred employees for manufacturing businesses and less than $7.5 million in annual receipts for most non-manufacturing businesses. A Financial Advisor, Insurance Consultant, Employee...

There are several common myths around retirement plans that prevent small businesses from offering these benefits, but the facts can help small business owners understand the value of 401(k)s and how they can build upon business success.  

Here are 5 common 401(k) misconceptions:

Myth No. 1: Offering a 401(k) plan is too expensive.

Fact: According to a recent survey from a national payroll provider, 59 percent of small business owners who don’t offer a retirement plan think they can't afford it. The truth is, the tax benefits from retirement plans help offset the cost. Business owners can deduct 401(k) expenses and contributions, such as administrative fees, employer matching, or profit-sharing, on business taxes, plus tax incentives for new plans can be as high as $1,500 ($500 a year for three years).

Myth No. 2: My company is too small to offer a 401(k) plan.

Fact: Business owners can start small with a plan that can grow with the business. The truth is, retirement plans exist for all business sizes, including sole proprietorships. 

Myth No. 3: Employees can’t afford a 401(k) plan.

FactThe truth is, It doesn’t take much to get started. An employee’s daily small coffee costs around $1.64, totaling around $18,000 over 30 years. Factoring in compounding interest, that same $1.64 per day in 401(k) contributions can amount to $60,644 over 30 years (assuming an investment return of seven percent).

Myth No. 4: Employees aren’t interested in a 401(k).

Fact: According to the Federal Reserve Board’s Report on the Economic Well-Being of U.S. Households, nearly one-third of Americans have no retirement savings, but a study by MetLife found that 64 percent of employees said that a retirement plan is critical or very important. The truth is, employees are interested in solutions to help secure their families’ future and their own.

Myth No. 5: An IRA is enough.

Fact: A 401(k) plan has many advantages compared to a SIMPLE IRA. The maximum annual salary deferral is higher for 401(k) plans than that of a SIMPLE IRA and the 401(k) plan catch-up contribution over the age of 50 is double that of a SIMPLE IRA. The truth is, 401(k) plans also feature profit-sharing, loan availabilities, and Roth option opportunities that SIMPLE IRAs do not.

Is the Gig economy setting the stage for a return of the OpenMEP® retirement plan concept?

TAG Resources President Troy Tisue thinks so.

On Tuesday, February 6, 2018, the U.S. Senate subcommittee on Primary Health and Retirement Security opened a hearing and roundtable discussion on the impact of gig workers and the future of retirement savings which included Troy Tisue, President of TAG Resources, a leader in retirement plan administration outsourcing. About the Gig Economy: The US Department of Labor and Statistics classifies a “gig” worker as a contingent worker or independent contractor. According to the statistics cited by any number of surveys and from any random think tank, the number of gig workers might surpass 40% of the workforce in the next couple of years. Tisue’s statement to the subcommittee focused on TAG Resources’ retirement program, Open MEP®. In 2004, TAG first provided professional plan fiduciary service and aggregation of plan investments for small and medium 401(k) plan sponsors through use of the multiple employer plan (MEP) model, where unrelated employers could establish and co-sponsor a more robust single retirement plan. Then, TAG created the Open MEP® concept to leverage cost, provide a better service model, and provide fiduciary protection. “There are a number of designs under which the Open MEP® structure could be used for the gig economy; these are only the most obvious examples. Permitting Open MEPs would enable the innovativeness of the marketplace to design MEPs which could accommodate most circumstances, while providing the independent worker both ERISA protections as well as institutional pricing which would not otherwise be available to her or him,” said Tisue. "TAG Resources has for many years been in the marketplace as the country’s leading aggregator of plan services for both closed MEPs and for those employers who would otherwise benefit from changes which would permit Open MEPs.” Other participants in the subcommittee hearing included Camille Olson, of Chicago, representing The U.S. Chamber Of Commerce; Vikki Nunn, CPA and Shareholder of the accounting firm of Porter, Muirhead, Cornia & Howard, of Casper, WY; and Monique Morrissey, an Economist with the Economic Policy Institute in Washington, DC.  

Click here to view the Subcommittee Hearing

Throughout 2017, TAG Resources added new programs and solutions to the retirement plan services already being offered.  Building on TAG's 401(k) Aggregated Solution, we took our experience and expertise to create a larger platform of products, including: TAG Retirement Program | Solo(k) Solution Business owners know that running a Retirement Plan can consume time...