401(k) Estimating your 401(k) plan costs PDF by Bradleystephens


									401(k) Plan

                                                              401(k) Plan Costs:
This worksheet is for general estimating cost
                                                                                                                                               Example         Your Company
purposes only and plan fees are indicative
of the industry, not a specific plan. Costs to
                                                              1. Number of eligible employees                                                      40
add funds, substitute funds or for loan set-up
fees, if such costs are applicable from the plan              2. Average salary                                                            $30,000
provider, are not included. You should speak with
your financial advisor regarding specific options             3. Number of employees you think will participate                                    24
and costs for 401(k) plans and contribution
limits for business tax deductions.
                                                              4. Total employee salary for those who may participate
                                                                 (Multiply line 2 by line 3)                         $720,000

                                                              5. Maximum contribution your plan will allow                                      12%

                                                              6. Average you think your employees will contribute                                 8%

                                                              7. Employee contributions
                                                                 (Multiply line 4 by line 6)                                               $57,600

                                                              Matching Employer Contributions:
                                                              Discretionary Match* — The employer can contribute to each eligible participant’s account a percent
                                                              of the participant’s elective deferral. The employer will set the percentage prior to the beginning of the
                                                              year, not to exceed 25% of the participant’s salary.
Tax Credit
                                                                8. Estimated employer match per participant
For employers with fewer than 100 eligible                         for each $1.00 contributed
employees, a 50% tax-credit for startup                            (i.e., 25% for $0.25 on the $1.00
plans – 50% of cost up to a maximum                                or 100% for $1.00 on the $1.00)                                              50%
of $500 is available.
                                                                9. Maximum percent of participant’s
This credit is available for the first three (3) years             elective deferrals matched                                                     6%
of the plan and cannot exceed $500 in any year.
If you are starting a new plan in one of the years            10. Total employee salary from line 4                                       $720,000
above, please consult with your tax advisor
for more information.                                         11. Multiply line 8 by line 9 by line 10                                     $21,600

                                                                 a. Recordkeeping fees/Trustee fees                                           $2,400

                                                                 b. One-time set-up fee                                                       $1,000

                                                                   Total: First-year plan administrative costs                                $3,400

                                                                 c. Add discretionary matching employer contribution
                                                                    (Line 11)                                                               $21,600

                                                                 Amount of potential business
                                                                 tax deduction                                                           $25,000

                                                         * There are other matching employer contribution options available such as non-discretionary match,
                                                           tiered match or flat dollar match, to name a few.

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