CBIZ Sattler Adventure Sports Blog

Insights and tips on how to protect your adventure sports business, giving you and your guests peace of mind.

Ward, Hayden
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Invest in Your Guides’ Futures with 401(k) Planning

401(k) Planning for Outfitters

Financial professionals estimate that most people will need about 70% of their current annual income to live comfortably during retirement. Low-income earners may need 90% or more of their current income to maintain their standard of living when they stop working.

Whether your employees are close to retirement or have decades left, saving for retirement is a key component of their financial security. Offering a 401(k) account or other retirement benefits as part of your benefits packages can increase employee loyalty and be a great recruitment and retention tool.

Establishing a 401(k) Plan at Your Outfitter

The first step in establishing a 401(k) plan is deciding whether to set up the plan yourself or to consult a professional to help create and maintain the plan. You also need to decide  which type of 401(k) plan  is best for your outfitter and guides business.

Traditional 401(k) plans offer the most flexibility. Employers have discretion over whether to make contributions on behalf of all participants, to match employees’ deferrals, or to do both.

Safe harbor 401(k) plans include several kinds of 401(k) plans that aren't subject to the annual benefits testing required with traditional 401(k) plans. However, employees in these plans must receive a certain level of employer contributions.

Automatic enrollment 401(k) plans allow you to automatically enroll employees and place deductions from their salaries in certain default investments, unless the employee elects otherwise. This is an effective way for employers to increase participation in their 401(k) plans.

Establishing A 401(k) Plan at Your Business

Adopt a written plan document. This serves as the foundation for day-to-day plan operations, and you are bound by the terms of this document. If you have hired someone to help with your plan, that person likely will provide the document, or you may want to obtain assistance from a financial institution or legal professional. You have flexibility in choosing some plan features, while others are required by law.

Arrange a trust fund for the plan’s assets. A plan’s assets must be held in trust to ensure that assets are used solely to benefit the participants and their beneficiaries. The trust must have at least one trustee to handle contributions, plan investments and distributions. If you set up your plan through insurance contracts, the contracts do not need to be held in trust.

Develop a recordkeeping system. An accurate recordkeeping system will track and properly attribute contributions, earnings and losses, plan investments, expenses and benefit distributions, and will help prepare the plan’s annual return/report that must be filed with the government. If a financial institution assists in managing the plan, it typically will help keep the required records. A firm dedicated to providing recordkeeping services will oftentimes provide a plan document and trust services in addition to the recordkeeping services.

Provide plan information to employees eligible to participate. You must notify employees who are eligible to participate in the plan about certain benefits, rights and features. In addition, a  summary plan description (SPD)  must be provided to all participants. The SPD is the primary vehicle to inform participants and beneficiaries about the plan and how it operates. The SPD is typically created with the plan document. You also may want to provide employees with information on the advantages of your 401(k) plan to encourage participation.

Operating a 401(k) Plan for Your Guides

In all 401(k) plans, participants can make contributions through salary deductions. Employers can also make contributions for participants.

Traditional 401(k) Plan—If you decide to contribute to your plan, you have options. You can contribute a percentage of each employee’s compensation to the employee’s account (a non-elective contribution), you can match the amount your employees decide to contribute, or you can do both. Under a traditional 401(k) plan, you also have the flexibility of changing the amount of employer contributions each year, according to business conditions.

Safe Harbor 401(k) Plan—Under a safe harbor plan, you can match each eligible employee’s contribution, dollar for dollar, up to 3% of the employee’s compensation, and 50 cents on the dollar for employee contributions that exceeds 3%, up to 5% of each employee’s compensation. Alternatively, you can make a non-elective contribution equal to 3% of compensation to each eligible employee’s account. Each year you must make either matching or non-elective contributions.

Roth Contributions - 401(k) plans may permit employees to make after-tax contributions through salary deduction. These designated Roth contributions, as well as gains and losses, are accounted for separately from pretax contributions. However, they are treated the same as pretax contributions for many key aspects of the plan, such as contribution limits. A 401(k) plan may allow participants to transfer certain amounts in the plan to their designated Roth account in the plan.

Prepare for the Unexpected

401(k) plans can be a powerful tool to promote  financial security  in retirement. They provide a host of benefits for outfitter employers, including aiding in hiring and retention, tax-advantaged contributions, and the ability to include all employees. Employees also enjoy advantages such as flexibility with contributions and investment options and tax-free contributions and earnings.

Managing retirement plan and investment complexities on your own can be time-consuming and difficult. Learn more about  our retirement and investment solutions*  today. If you are looking for insurance protection,  request a free CBIZ Adventure Sport Insurance quote.

This blog may contain scenarios that are provided as examples only. In an actual claim situation, coverage is subject to the terms, conditions and exclusions of the policy issued. The information provided is general in nature and may be affected by changes in law or the interpretation of such laws. The reader is advised to contact a professional prior to taking any action based upon this information.

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