Products May 1, 2013

New IRA Is Retirement Plan Option for Small Businesses

May 1, 2013 (PLANSPONSOR.com) – Starter(k), a payroll deduction individual retirement account (IRA) for small businesses, has been released.
Reported by

The Online 401(k) designed the IRA specifically with small businesses of 100 or fewer employees in mind.

“Approximately 92% of the smallest businesses do not have a retirement savings option for their employees, with cost and liability cited as two key reasons why they don’t,” said Chad Parks, founder and CEO of The Online 401(k). “We believe that the Starter(k) solution will benefit those businesses that want to enable retirement savings without cost or complexity to their human resources function.”

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

According to Parks, benefits of Starter(k) include: 

  • Cost: Employers pay $25 a month, versus a 401(k) that may cost several thousand dollars per year, and participants pay $4 a month.
  • Investments: The plan features 10 target-date model portfolios made up of exchange-traded funds (ETFs) for a fee of only 0.25%, which are inclusive of the investment expenses, fiduciary advice and trading costs. The portfolios are carefully selected and monitored by a third-party investment expert.
  • Savings: Participants’ savings are automated so they do not have to remember to set aside money each month. Once they pick their investment portfolio, no other decisions need to be made.
  • Navigation: The Online 401(k) offers a web-based platform, so employers do not need to worry about paperwork and employees can check their accounts online.
  • Setup: Offers out-of-the box, simple setup in a matter of minutes.
  • Liability: Unlike 401(k)s, IRAs such as Starter(k) do not fall under the Employee Retirement Income Security Act (ERISA), so business owners can offer a retirement plan without incurring overhead compliance costs of complying with ERISA.

More information is at http://www.theonline401k.com.

Benefits May 1, 2013

Small Business Retirement Plans Survived Recession

May 1, 2013 (PLANSPONSOR.com) – A six-year analysis of small businesses’ retirement plans by Fidelity Investments shows both sponsor and participant commitment during the recession.
Reported by

The analysis of more than 200,000 small business accounts that utilize a Simplified Employee Pension Plan (SEP-IRA), Self-Employed 401(k) or Savings Incentive Match Plan for Employees (SIMPLE-IRA) with Fidelity shows average balances in these plans increased 20% since 2007, and jumped an average of 64% since 2008 when balances were generally at their lowest point.  

The average contribution to these retirement savings accounts increased across the board since 2007, with those using Self-Employed 401(k)s showing the largest increase of 21% to $20,950. Employer contributions to SEP-IRAs increased 14% from 2007, reaching $13,250 in at the end of 2012, while average employer/employee contributions to SIMPLE-IRAs increased the least, rising 4% to $6,000.   

Get more!  Sign up for PLANSPONSOR newsletters.

As a result of the increased contributions and market rebound, average balances also have grown since 2007. The average balance of Self-Employed 401(k) plans rose from $103,400 in 2007 to $119,500 in 2012—a 16% increase over six years—signaling a strong rebound for small business owners who are using retirement plans for savings purposes. SEP-IRA and SIMPLE-IRA balances also increased by 17% to $71,300 and 26% to $31,100, respectively.

«