Learn the basics

Setting up a retirement plan may sound daunting, but it doesn’t have to be.

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Simply Retirement by Principal® is designed to make it easy to set up a plan yourself, step by step. Once you understand the basics, it’s really just a matter of making choices that fit your situation. Here are a few things to consider as you look at your retirement plan options.

Simply Retirement by Principal®is designed to make it easy to set up a plan yourself, step by step.Once you understand the basics, it’s really just a matter of making choices that fit your situation. Here are a few things to consider as you look at your retirement plan options.

When you’re researching a retirement plan that works for your business, questions may come up. We can help.


Who can offer a retirement plan?

Who can offer a retirement plan?

Businesses of any size can offer a retirement plan, whether it’s a solo 401(k) for an owner-only operation or a group plan for dozens of employees. No business is too small to qualify. In fact, Simply Retirement by Principal® is designed for businesses with fewer than 100 employees.

Why offer a retirement plan?

Why offer a retirement plan?

For business owners, potential benefits include:

Recruitment and retention. A retirement plan is a valuable benefit that can help you compete for top talent.

Tax advantages. SECURE Act legislation allows small businesses with no more than 100 employees to claim a tax credit of 50% of the qualifying start-up costs for a new employee retirement plan*. There’s also a tax credit for including an eligible automatic contribution arrangement*. Plus, any matching contributions you make to employee retirement accounts are tax-deductible.

Helping employees prepare for the future. Research shows that workers are more likely to save for retirement when they have access to a 401(k) or similar plan through their employer*. It can fill a critical need at a time when the vast majority of Americans haven’t saved even a fraction of what they would need to retire comfortably.

68%

said retirement benefits are important in accepting a job.

62%

said retirement benefits are important in staying with a job.

“Retirement Benefits, Workplace Culture Crucial to Job Seekers,” National Association of Plan Advisors (NAPA), July 2019.

What are some of the potential benefits to your employees?

What are some of the potential benefits to your employees?

Convenience

Contributions are automatically deducted from employees’ paychecks each pay period, so they don't have to budget separately for setting money aside.

Savings

The earlier employees start saving, the more time they’ll have for their retirement accounts to grow. And any matching contributions you offer give them an opportunity to take advantage of “free money”—providing even more incentive to maximize their contributions.

Tax advantages

Employee pre-tax contributions are deducted from paychecks before income taxes, reducing taxable income. Taxes are also deferred on any investment earnings until the money is withdrawn in retirement.

Flexibility

Employees can request to take a loan from their 401(k) plan balance and select a loan repayment schedule that suits them within plan terms.

Financial wellness

Simply Retirement by Principal® 401(k) plan participants will have access to Edukate, a comprehensive financial wellness platform that provides tools and resources to employees to better manage their current and future financial well-being.

How much could your employees save for retirement?

How much could your employees save for retirement?

The earlier your employees start contributing to a 401(k) plan, the more their retirement savings could potentially add up.

What’s involved in managing a 401(k) plan?

What’s involved in managing a 401(k) plan?

As the plan administrator, you and/or a designated employee (such as a human resources manager) will have some tasks, including:

Keep employee information up to date

As employees are hired or when they leave, just provide the latest information. If you use QuickBooks® Online, this information can automatically sync with your retirement plan.

Submit contributions each payroll

Each payroll, you’ll need to deduct employee contributions from their pay. Then, you can easily submit those contributions and any matching contributions to us via EFT from your bank account.

Approve employee withdrawals/loans

If an employee requests money out of the plan, you’ll need to approve the request.

Complete annual plan compliance activities

Plan compliance basically means that you’re following the rules. The Ubiquity Retirement + Savings® compliance system is fully automated—you just need to answer some questions each year. We’ll then crunch the numbers and create the necessary forms for you to review and submit to the IRS.

You might find it helpful to work with a financial professional. But if you’re not working with one, that’s okay, too. Simply Retirement by Principal® is designed to make it easy by automating some of the paperwork and notifying you when certain actions are needed—so you can feel confident you’re staying on top of things.

How can you protect yourself and limit your liability?

How can you protect yourself and limit your liability?

Choosing investments for a retirement plan comes with a lot of responsibility. It’s called being a "fiduciary" and fiduciaries are personally liable for those choices.

Simply Retirement by Principal® makes it easier for you with Wilshire Associates, Inc. This will be the plan’s 3(38) investment fiduciary. That means Wilshire Associates, Inc. will provide objective, independent third-party oversight for the screening, selection, and monitoring of the plan’s investment options. They’ll also make changes to the investment lineup as appropriate. This service will help manage your related fiduciary liability.*

Wilshire Associates, Inc. is a diversified global financial services firm with 40-plus years of experience providing investment guidance to some of the largest plan sponsors in the U.S.

*You, as plan fiduciary, are ultimately responsible for the selection and monitoring of their delegated responsibilities, not by any member of Principal® and Ubiquity Retirement + Savings®

How will automatic enrollment and contributions work?

How will automatic enrollment and contributions work?

If you choose a 401(k) plan with Simply Retirement by Principal®, you’ll start by answering a few questions to create a plan proposal with cost estimates. Once you complete your plan purchase, you'll be prompted to create a login and password to access the Ubiquity recordkeeping platform. Log in, provide any necessary additional information, sign required documents, and pay the one-time startup fee of $500. Then you'll be able to start onboarding participants. Participants will receive an email to create their own login and set up their account.

Automatic enrollment

The Simply Retirement by Principal® 401(k) plan has automatic enrollment. That means all of your employees will be automatically enrolled in the plan as soon as they are eligible.

To be eligible, employees must be age 21 or older and meet the employment requirement you set, whether it's their first day of work, after three months of work, or on their first employment anniversary. Once eligible, employees will be automatically enrolled at the default pre-tax contribution percentage you set. They’ll also have contributions directed to the plan’s qualified default investment alternative (QDIA) unless they elect otherwise. A QDIA is a default investment used when money is contributed to an employee’s 401(k) account, but the employee hasn’t made their investment election.

Don't worry; employees can change their contributions and investment election or opt out of contributing to the plan at any time. Automatic enrollment can help increase participation, simplify administration, reduce follow-up, and help your employees save for retirement.

Employee contributions

Employee contributions will be deducted from payroll each pay period. Simply Retirement by Principal® can integrate with select payroll providers to make this process easier for you.

What are the costs involved in a retirement plan?

What are the costs involved in a retirement plan?

As you research your options and compare pricing, there are several components to keep in mind. Plan expenses are the fees you and/or your participants pay for things like initial plan setup, recordkeeping, and investment management. These are set by the organizations involved with providing services for a plan. Plan costs are any matching contributions you decide to make, which you’ll set in your plan design. In addition, if you choose to work with a financial professional, there is typically a fee for their services.

Flat recordkeeping fees vs. asset-based recordkeeping fees

When it comes to plan expenses, one important consideration is whether fees are flat or asset-based.

Flat fees have two advantages. First, they’re consistent, so you can plan for them in your budget. And second, they’re typically an advertised amount that’s the same for everyone, so there’s no question if others are getting a better price.

Asset-based fees are determined by the assets in the plan, so as employees contribute and plan assets change, the fees change accordingly. When a plan is initially started, asset-based fees may appear lower than flat fees, but they can quickly add up over time.

Pricing for our solution

The Simply Retirement by Principal® 401(k) plan has a simple flat recordkeeping fee structure.

The one-time setup fee of $500 is all you pay up front to get started. Then you’ll pay $150 per month ($450 billed quarterly). If you choose to pay the $6 per participant, per month fee on your employees’ behalf, this will also be billed quarterly, three months at a time. Otherwise, it will be deducted from participants’ plan assets. Custodial and investment fees are charged against participating employees’ accounts (those vary by investment and range from ,* as of May 1, 2020).

Financial professional fees

If you choose to work with a financial professional, they will also have a fee for providing their expertise and assistance with the setup and management of your plan. You may pay this fee directly to your financial professional, or it can be deducted from participant accounts.

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*50% of the qualifying start-up costs for a new employee retirement plan:50% of the qualified startup costs paid or incurred, but limited to the greater of (1) $500 or (2) the lesser of (a) $250 for each non-highly compensated employee who is eligible to participate in the plan or (b) $5,000. Qualified startup costs (1) In general “qualified startup costs” is ordinary and necessary expenses of an eligible employer which are paid or incurred in connection with -- (i) the establishment or administration of an eligible employer plan, or (ii) the retirement-related education of employees with respect to such plan. (2) Plan must have at least 1 participant: would not apply if plan does not have at least 1 employee eligible to participate who is not a highly compensated employee. Information about the SECURE Act is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

*Eligible automatic contribution arrangement: Up to $500 per tax year for each year of the 3-taxable-year period beginning with the first taxable year for which the employer includes an eligible automatic contribution arrangement. This credit is for plans that include the eligible automatic contribution arrangement (EACA) feature only. Information about the SECURE Act is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements..

*Workers are more likely to save for retirement when they have access to a 401(k) or similar plan through their employer:“Employers: The Retirement Security Challenge,“ Transamerica Center for Retirement Studies, October 2019.

As part of the Simply Retirement by Principal® solution, Wilshire Investments, Inc. is the fiduciary responsible for the selection and monitoring of the investments.

Edukate is not affiliated with any company of the Principal Financial Group.