401K Plan Government Mandate
By June 30, 2022, companies with 5+ employees MUST offer a 401k plan to their employees. Larger employers had earlier deadlines.
What’s a 401k Plan?
A 401k plan is an employer-sponsored defined-contribution pension account defined in subsection 401k of the Internal Revenue Code. Employee funding comes directly off their paycheck and may be matched by the employer.
How long does it take to set up a 401k program?
It can take months to set up a program.
What if I don’t set up a program?
There are government imposed fines for not setting up a program in time. Fines are $250 per employee.
There is a free state-sponsored program called CalSavers. But, VMA has done the research and strongly recommends our members against choosing the CalSavers program for the following reasons:
- CalSavers is not a true 401K plan. It’s a Roth IRA plan where you are only allowed to make after tax contributions.
- Contributions limits are much lower than true 401k plans
- There is no employer contribution matching allowed
- CalSavers is not subject to worker protections under Federal ERISA laws
- Fees are high and fall completely on the employee
VMA-Vetted 401k Programs
VMA has evaluated several 401k plan providers and VMA recommends the following two options:
- Catalina Capital Group
- Diversified Financial Advisor Plan
Both 401k providers offer fully compliant low-cost plan designs with excellent investment options.
Note: VMA does not receive any financial compensation or gain from any of these options.