Employers make the decision to establish a 40(k), but it has to be good enough for employees to want to participate. An employer is responsible for establishing a 401(k) and for overseeing it as the sponsor and fiduciary.
A self-employed individual can also establish an Individual 401(k), which has the same contribution limits and requires none of the testing or auditing of a regular plan. Other options for work-site retirement plans are SIMPLE IRAs, SEP IRAs, and various kinds of profit-sharing and deferred compensation arrangements.
401(k)s are popular for their flexibility, high contribution limits, relatively low employer contribution requirements as compared to other types of plans. Employers have the option to not contribute at all, but they need to make sure that the plan still gets enough participation from their average employees to satisfy the ADP and top-heavy testing.
If only the highly compensated employees (HCEs) are contributing, the plan will not be allowed to continue, and contributions may be returned. Employers serve as the sponsor and work with a custodian, bookkeeper, and administrator, to maintain the plan on behalf of the employees.
The administrative roles of the plans are divided in this way to prevent conflicts of interest and to ensure that the plan works in the best interest of the employees. This is what it means for the employer to serve in a fiduciary capacity.
This is not to be confused with the Fiduciary Standard of advisors with a Series 65 or 66 license, which has become a hot topic in 2016 with new Department of Labor regulations.
If you want to buy shares of companies that Warren Buffett is buying, purchase shares of Berkshire Hathaway
The IRS permits such loans, but it is rare to find a plan that allows it. In the vast majority of cases, you cannot
A Coverdell ESA is an account which can be used to save for educational expenses. They used to be called Educational IRAs
Breakouts are events where a stock or index suddenly changes the magnitude and direction of its trading range
In its simplest form, a profit is the revenue or income gained from an entity after all expenses/overhead is accounted
The Law of Demand states that as prices increase, demand will decrease, and vice versa. That is to say, inversely related
Adjusted Book Value takes true fair market value of all assets and liabilities into account. Used when facing bankruptcy
When foreigners purchase shares of domestic companies to add diversification it is known as Foreign Portfolio Investment
Dividend recapitalizations will cause the share price to reduce, largely because the company’s debt-to-equity ratio...