How accountants can help their clients unlock 401(k) success
As an accountant, you play an essential role in helping your clients achieve important short and long-term financial goals. One of those goals may be planning for retirement.
Your experience and confidence in the complex world of retirement planning might vary. But, whether you're a retirement novice or a seasoned expert, your clients may ask you to help guide them through setting up — and even managing — a 401(k). In fact, according to our research, 80% of financial and benefits professionals say they have advised their clients on offering a 401(k), of which nearly 60% say their clients asked them for retirement advice.¹ Where do you land?
Offering retirement plans to your clients can be a great way to grow your business and boost your reputation as a trusted advisor. In this post, we'll explain everything you need to know to confidently help your clients offer a 401(k).
Let's get started.
Why your clients care about 401(k) plans
There are a few reasons why your clients may be eager to offer retirement benefits to their teams, including:
1. There are tax advantages for offering retirement benefits
More than two-thirds of benefits decision-makers who don't offer a retirement plan said they believe offering a 401(k) is cost-prohibitive. However, thanks to new tax credits established under the SECURE 2.0 Act, offering a retirement benefit can be easier and more affordable than ever before.
In fact, if your client is offering their first 401(k), they may be eligible for up to $16,500 in tax credits that could cover 100% of the cost for the plan’s first three years. You can learn more about the SECURE 2.0 retirement plan tax credits and calculate your client’s potential costs on our blog.²
And don't forget — employer contributions are generally 100% tax deductible on an employer's federal income tax return.
2. Keep your clients compliant with retirement state mandates
Currently, multiple states have active mandated programs that require businesses to offer a retirement benefit, and many others have introduced or passed legislation to implement state-mandated retirement programs. While the rules of these programs can vary from state to state, there are consequences for businesses that fail to comply, including hefty fines and legal consequences. By helping your clients offer a qualified 401(k) plan, you can help them meet the mandate and reap the benefits we outlined above.³
3. 401(k) plans can help your clients attract and retain top talent
While retirement plans can help employees save for their futures, there are also many benefits for businesses that offer a 401(k) — and the proof is in the pudding. Research shows that a retirement benefit like a 401(k) can be a powerful tool to help your clients attract new talent, keep their teams happy, and may even help with retention.
Your role in designing and implementing a 401(k) plan
Long story short — the role you might play helping your clients with a 401(k) can vary depending on your client's wants and needs and whether or not you serve as a fiduciary on the plan.
Here's a look at some of the ways you may be asked to support your clients' retirement benefits:
Building and customizing a plan
Businesses of all sizes can set up a 401(k) plan. When designing a 401(k), your client can customize their plan with several types of provisions. These include but aren’t limited to:
- A traditional 401(k) is a standard plan that can offer the most flexibility in plan design for your clients. This especially comes into play when deciding how much in employer contributions (if any at all) they’d like to offer. With flexibility comes more responsibility to ensure a plan passes non-discrimination tests. Note that failing these tests could result in your clients incurring unexpected expenses to make the plan compliant.
- A Safe Harbor 401(k) plan can be a great solution for clients who want to play it safe with compliance. These plans come with built-in protections that automatically satisfy most IRS nondiscrimination tests. However, your clients must contribute to their employees' 401(k) plans in exchange for these protections.
- Starter 401(k) plans help employers offer a retirement benefit by streamlining two of the most significant barriers when it comes to offering retirement savings plans: cost and ease of administration. These plans have fewer restrictions on employee participation, eliminating the need for nondiscrimination testing. But note that with a Starter plan, your clients won’t be able to contribute to their employees’ savings, resulting in lower overall contribution limits.
As you're helping your clients choose a 401(k) plan that supports their goals, you should consider the following factors:
Can your client’s business afford to offer a 401(k) match? Offering a 401(k) match can help your clients keep their employees happy and engaged. The numbers don't lie — 72.5% of employees want 401(k) matching from their employers more than any other financial benefit, ranking higher than performance-based pay bonuses, standard-of-living raises, health savings accounts, and financial planning services.
Is your client looking for a plan that automatically satisfies IRS requirements? Offering a 401(k) can feel overwhelming from a compliance perspective. If this rings true for your client, you may want to suggest a Safe Harbor 401(k), which generally satisfies IRS nondiscrimination tests. Smaller companies may also consider a Starter 401(k), which satisfies nondiscrimination tests but has more plan limitations.
Does your client want to offer profit sharing? Profit sharing is a pre-tax contribution your clients can make to their employees’ 401(k) accounts at the end of the year. It’s a way for businesses to offer an end of year bonus directly into their employees’ retirement account, which offers tax advantages for both parties. If this benefit sounds advantageous to your client, you may want to avoid recommending a Starter 401(k), which doesn’t allow for employer contributions.
Plan administration and compliance
On a day-to-day basis, your client may ask you to monitor 401(k) contributions and account balances. But you also may be responsible for making sure their plan is compliant with IRS regulations and requirements, as well as making sure the plan meets legal standards and avoids penalties.
Keeping 401(k) plans compliant can feel like one of the most important and challenging aspects of managing a retirement benefit. If your client offers their team a 401(k), they'll need to file and submit Form 5500 each tax season. Learn more about these responsibilities below:
Answering client questions and providing support
Whether this is your client's first or fifteenth time offering a 401(k), they'll likely have questions for you. If the ins and outs of retirement benefits are new to you, don't worry. There are many resources and programs you can leverage to help you set your clients up for success.
Help your clients offer a modern 401(k) with Guideline Pro
Guideline Pro is a free platform we created to make it simple for accountants and benefits professionals to offer 401(k) plans to their clients. By offering retirement benefits, you can grow your own accounting business and strengthen your offering as a service provider. The program costs nothing and features many tools, support, and perks, including:
- Keep all your clients' plans in one place: The Guideline Pro dashboard makes it easy to set up, track, and manage all your clients' 401(k) plans.
- Affordable plan pricing: Our 401(k) plans come with low monthly costs and no transaction fees. So your clients won’t have to pay extra for plan setup, plan transfers, or 5500 prep.⁴
- Stay in compliance: You and your clients can rest easy knowing that we keep our plans compliant with year-round compliance testing.⁵
- Access to a dedicated relationship manager: As a Guideline Pro partner, you'll be matched with a dedicated relationship manager who can answer you and your clients’ questions and help you navigate any outstanding tasks. From understanding your dashboard to managing your plan details, we're your partner throughout every step of the 401(k) process.
- Pass on plan discounts to your clients: Guideline Pro partners can pass on meaningful savings to their clients year-round. For example, we’ll give 4 months of no employer fees for each client you sign up and we’ll waive 6 months of employer fees for your firm’s own Guideline 401(k) plan.⁶
- Reap the benefits of referral rewards: As a Guideline Pro partner, you can earn $100+ for each new 401(k) you add. Plus, rewards are doubled for eligible plans with more than 50 employees.⁷
- Stay updated: It can be challenging keeping up with the ever-changing retirement industry. But as a Guideline Pro partner, we’ll always keep you in the know and provide education about everything from the latest on state mandates to the SECURE Act and beyond.
Disclaimers:
The information provided herein is general in nature and is for informational purposes only. It should not be used as a substitute for specific tax, legal and/or financial advice that considers all relevant facts and circumstances. You are advised to consult a qualified financial adviser or tax professional before relying on the information provided herein.
¹ Source: Guideline research run with Suzy. Insights based on data collected December 2023 through January 2024, from a survey of 474 US-based financial and benefits professionals. Guideline was not identified as the survey sponsor. The experiences of the respondents in this survey may not be representative of all people.
² This content is for informational purposes only and is not intended to be taken as tax advice. Please consult a tax professional to determine what types of tax credits or deductions your company is eligible to claim.
³ This information is general in nature and is for informational purposes only. Deadlines, fees, and other program details are subject to change by the state without notice and should be checked prior to making any decisions.
⁴ Third-party auditor fees will apply to large plans where an audit is required. These fees are not charged by Guideline.
⁵ All plans of related entities must be administered by Guideline in order to provide compliance testing.
⁶ Employer fees include the monthly base fee and a monthly participant fee after the new plan begins. Other participant-paid fees will apply. See our Form ADV 2A Brochure for more information regarding Guideline’s fees. This offer can’t be combined with other offers. Guideline reserves the right to modify or discontinue this promotion at any time without prior notice.
⁷ A new Guideline 401(k) plan invited through your dashboard, provided that you do not act as a fiduciary for the plan, is eligible for referral payment. A new plan is defined as a start-up 401(k) plan and does not apply to a preexisting 401(k) plan transferring to Guideline.
