Q. What is a fiduciary?
A. A person who exercises any discretionary authority or control over the management of a retirement plan or its assets. This can include the employer, its officers, and any trustee. | Q. How do we satisfy Section 404c? | | A. | A. | The plan must offer at least three diversified investment alternatives | | | B. | A participant must be given: | | | | 1. | Description of the investment options available under the plan and their investment objectives | | | | 2. | Risk and return characteristics of each investment options, including information relating to the type and diversification of assets comprising the portfolio of the designated investment option. | | | | 3. | Identification of any designated investment managers. | | | | 4. | Participant must be given a reasonable opportunity to give investment instructions, in writing or otherwise, and receive written confirmation of his/her investment instructions. | | | | 5. | Participant must be able to change investment instructions at least once every three months. | | | | 6. | a. | Specify the circumstances in which participants may give investment instructions, including an explanation of any specified limitations on the instructions under the terms of the plan. | | | | | b. | Define any fees and expenses under the plan. | | | | | c. | Make the name, address, and phone number of the plan fiduciary available upon request. |
Q. Are employee 401k educational meetings required?
A. Yes. Plan sponsors have a fiduciary responsibility to help employees understand their plan. This is normally satisfied with periodic enrollment and educational meetings.
Q. What are the benefits of continuing the company match as opposed to doing away with it?
A. The match helps increase employee participation and gives employees an incentive to contribute more to the plan. This creates a more productive work force and potentially lowers plan cost through volume discounts. A matching contribution also helps the highly compensated employees contribute a higher percentage of their salary to the plan.
| Q. What are the alternate ways to save the company money without eliminating the company match? | | A. | 1. | Charging allowable plan fees to plan participants. | | | 2. | Increased participation may sound counterproductive for plans looking to reduce expenses, but it can also lower costs through volume discounts. | | | 3. | Lower the matching contribution percentage. | | | 4. | Consider switching to a discretionary profit sharing plan. This allows you to withhold payments to the plan when goals aren't met and reward employees when goals are met. |
Individual Investors | Q. What should I do with my 401k account balance when I leave/retire from my employer? | | A. You have several options when deciding what to do with your 401k account balance: | | 1. | Rollover to a self-directed IRA. This option also avoids the taxes and penalties on your money. It allows you to choose your investments and be properly diversified for your risk tolerances. | | 2. | Take a lump sum distribution. You are liable for income taxes on the entire amount and possible early withdraw penalties. (Don't spend it- save it!) | | 3. | Rollover to your new employers' plan. This will allow you to transfer the money with no taxes or penalties. | | 4. | Leave it where it is. Some plans permit this. This give you the ability to keep your money invested and watch it grow, however, you are no longer able to contribute to this plan. Also, there is no matching company contribution. |
| Q. How much risk is right for me? | | A. There are several factors that go into determining what type of investor you are. Most investors fit into one of four categories: | | 1. | Conservative: Individuals with less than 10 years until retirement. This investor needs to preserve capital at the risk of not participating in long term wealth creation. | | 2. | Balanced: This investor is in mid-career and has amassed some retirement assets through years of aggressive investing and now wants to take a "middle of the road" approach yet, still be well diversified. | | 3. | Growth: This investor is primarily interested in capital appreciation and is willing to take some risk. They realize these investments will have risk on a short term basis, but should provide superior performance over a long period of time. | | 4. | Maximum Growth: This investor wants to build significant wealth over time. They understand that significant losses can occur in the wrong environment, but the potential for significant gains over a long period of time are justifiable. |
Q. Why should I buy long-term care insurance?
A. The cost of health care is on the rise. Long-term care insurance can aid you in preserving assets in the event that you require care for a period of time. Typically, you want to purchase this as soon as possible in order to lock in a low premium. Q. When must I begin taking Required Minimum Distributions from my retirement account?
A. When you turn 70 ½. You must take the distribution before December 31st of that year or you may elect to delay the first payment until the following year. If you delay for one year, you must take that years distribution in the same year. One exception to this rule is if you are still working, you do not have to take the minimum distribution from your company retirement plan. However, if you have an IRA, you must begin required minimum distributions as stated above.
Q. What college savings options are available to me?
A. 529 College savings plans, Roth IRA's, Education IRA's- Contact our office and we can explain the differences and which is best for you. Q. How do I figure how much to save to meet my needs in retirement?
A. Most people need around 70% of their current income in retirement. Social Security will cover approximately 40% of your current income. To receive a Social Security income statement call 1-800-772-1213. PRC can assist you in planning for retirement.
Q. How do I know how much I need for my child's education?
A. The average cost of a 4 year college degree is $50,000 for a public university and $100,000 for a private university today. If your child is one year old now, the estimation is that the cost will double by the time your child graduates high school. So the sooner you start saving the more you will have to offset the rising costs of education. Acollege saving 529 plan makes it easy to save for these future expenses.
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