1Why are the fees so low?
The Social 401K is a Pooled Employer Plan 401k sponsored by Fellow Travelers Inc. The SECURE ACT allows employers to "pool" together to share administrative costs and duties. By sharing these costs and duties, participating employers can reduce expense AND administrative burdens.

Compare our fees with other 401K platforms and you'll see that SHARING is the better way to go!
Merrill Lynch
2I get Tax Credits for a 401k?!
The SECURE Act permits an eligible small business (under 100 employees who earned at least $5000 the previous year) to claim a tax credit for adopting a new 401(k) plan and/or a new automatic enrollment feature.

Qualified startup costs - Before the SECURE Act, a small business could claim a tax credit equal to 50% of their “qualified startup costs,” up to a $500 limit. NOW, the limit is the greater of (1) $500 or (2) $250 multiplied by the number of non-Highly Compensated Employees (non-HCEs) eligible for plan participation. The minimum credit is $500 and the maximum credit is $5000. This credit is accrued for the first three years and any unused amounts can be carried forward to later tax years! "Qualified Plan Costs" include fees paid to establish the plan, administer the plan, and paying for employee education / retirement planning services.

Automatic enrollment - Small businesses can earn an additional $500 tax credit by adding an automatic enrollment feature to a new or existing 401(k) plan. The credit is available for each of the first three years the feature is effective.

When combined, these credits can total up to $5,500 per year ($16,500 for 3 years). Since our 401K platform is so low cost, the 401K fees are even lower! You will probably have to carry forward unused tax credits to be applied in later years as well. NOTE: Tax credit can be carried forward up to 20 years and you can cover up to 50% of "qualified costs" per year.

3What is the Enrollment Timeline?
Onboarding Timeline

Plan Transfer Timeline
4Who Can Participate?
*Eligibility can be waived for ALL employees when initially joining the Fellow Travelers 401k.

Employees who have a full 12 months of service and 1000 hours during the past 12 months, and are at least 18 years old are eligible to enroll. (NOTE: The no match / no vesting option has no eligibility requirements. Anyone, age 18 or older can join at any time). Newly enrolled employees are enrolled on the first day of the following quarter.

Any entity type (i.e. IRS tax classification) can join The Social 401K Plan. Adding employees does not change eligibility in the Plan. You cannot have multiple company retirement plans in any given year. You must choose between having a 401k, 403b, 457 plan, SEP IRA, or SIMPLE IRA in any given year.

The 401K is usually the easiest vehicle to utilize and allows for maximum tax deferral of savings without as many limitations as other retirement plans.

You can still have an individual IRA at the same time as you have The Social 401K.
5What are the Contribution Maximums?
Employees can defer up to $19,500 per year (for 2021) of salary into the 401K. Employers can make matching contributions + profit sharing contributions up to $37,500 per year (for 2021) into each employee's 401K account. One person companies can make contributions as the employee AND employer.

Employees age 50 or over can defer an additional $6,500 per year into their 401K account.

*Employer Contributions are limited by testing requirements AND cannot exceed 25% of gross wages (20% if you are an LLC owner that does not take wages).
6What Are My Options?
Each company must choose:
  • Company Matching Amount: Amount that the company will pay each employee into the 401K
  • Vesting Schedule: When an employee legally receives "ownership" of the company matching amount


    The decision of how to structure this largely depends on the company. Are most of the active employees "owners"? What percentage of total wages paid go to owners vs regular employees? Are ALL the employees "owners", etc...
  • 7Safe Harbor 401K
    Our 401K offers multiple 401K plan Designs. But we prefer the "Safe Harbor" 401K. This Plan Type requires participating employers to match the first 4% of employee 401K deferrals, dollar for dollar.

    An employee makes $5000 per pay period. If the employee puts away $200 each paycheck (i.e. 4% of salary), the employer MUST match that 4% (i.e. $200) into their 401K account. Any additional amounts do not have to be matched. HOWEVER, you will NOT be subject to "Top Heavy" & ADP/ ACP Testing! See below.

    Safe Harbor 401K plans are great for businesses with many owners and highly compensated employees (who also have regular employees). The complex 401K plan testing that prevents owners and highly compensated employees from utilizing a 401K plan, is automatically given a passing grade, allowing owners & highly compensated employees to fully participate in the 401K plan!

    Vesting is immediate for safe harbor plans. Here's some INFO about safe harbor 401K programs. Keep in mind that nearly ALL of the administrative work is done for you with our 401K.

    Please see below for our non-Safe Harbor Options.

    EXAMPLE Safe Harbor 401K
    8Why Safe Harbor?
    A safe harbor 401k requires a dollar for dollar match of employee 401k contributions from the company / employer. This money is immediately the property of the employee. But sometimes this saves the group money in aggregate via reduced taxes. Plus there's not ADP/ACP or Top Heavy Testing!

    Employees are eligible for the safe harbor 401K after a full year of employment (with a minimum number of hours employed during that year). As employee benefits experts, we believe that people rarely do their best work when they do it "just for the money". Using money that is contingent upon "staying in the relationship" is an unhealthy strategy.

    Consider if an employee has been employed for a full year and has a wage of $15 per hour. A 3% salary match is $0.45 per hour or $3.60 per day. Furthermore, the match & employee deferral is sheltered from taxes as it is not "taxable wages", lowering the wage-related tax & insurance costs for the company. Treating employees as team members after a full year of service has more ROI than being able to "claw back" $3 in 401K contributions after "breaking up" the employment relationship.

    NOTE: If the Safe Harbor match is prohibitive, a lower match and the 3 year cliff vesting schedule is recommended. However, that Plan will be subject to testing each year.
    9Non Safe Harbor Plans: 401K Plan Testing
    Highly compensated employees (HCE) cannot OUTPACE contributions into the 401K plan both in terms of VOLUME AND VELOCITY! Furthermore, in the LONG RUN... 401K plans cannot be "top heavy" (i.e. 60% of total 401K plan account balances in the company Plan cannot belong to key employees).

    Here's a detailed example of ADP & ACP discrimination testing: ADP & ACP Testing

    Back of the Napkin Summary:
  • DEFERRAL TEST: If regular employees / NON-owners defer X% of their paycheck... THEN HCEs CANNOT put in more than X+2% of their "income" (however they cobble that "income" together) into the 401K.

  • COMPANY CONTRIBUTION TEST: If regular employees receive (ON AVERAGE) a 1% of income from the 401K (paid by the company)... THEN HCE's cannot receive more than double what regular employees received (in this case 2% matching from the company bank account towards the 401K contribution). If regular employees receive 2%, then it's 4% for HCE's... and so on.

  • TOP HEAVY TEST: The IRS demands that NO MORE THAN 60% of ALL 401K plan assets belong to "key employees". Key employees are owners and company officers (i.e. people who have legal power to control the company). So if the total account balance of all Key Employees is greater than 60% of ALL 401k account balances... it is a "Top Heavy" plan and must be fixed.

    While "top heavy" may not seem like a problem in year 1, consider the compounding effect of assets / money AND that key employees are usually owners & officers that don't leave the company. Regular employees come and go and roll out their 401K account balances into IRA's, leaving key employee account balances as the only remaining 401K assets. Top heavy can easily become a problem within a few years.
  • 10What if I don't want a safe harbor 401K?
    We offer 3 non-safe harbor vesting schedules (Cliff, Graded, None) that can be matched with any fixed rate employer matching schedule of your choice. MORE INFO HERE

    Here is an example of a non-safe harbor plan:
  • Employees are eligible after 1 year of service
  • Company matches 25 cents of each dollar.. for the first 5% of employee salary deferral
  • Graded Vesting Schedule: Employer retains control of the unvested employer portion of contributions

    Plans can be made MORE generous as well (i.e. 100% for first 6%)
    If you require a more complex vesting or contribution schedule, please Contact Us for pricing.
  • 11How Does Profit Sharing Work?
    Any "profits" the company has at the end of the year can be distributed / shared via the 401K program. This method of sharing profits is tax efficient and fair.
    Our safe harbor plans utilizes non-elective profit sharing that allocates an equal percentage of the profits that are to be shared, expressed as a percentage of wages.

    For Example:
    There is one owner and 3 employees eligible for the 401K plan. The company declares $100,000 in profits. The company / owner decides to share some of the profit through the 401K program.
    Owner A wages / "guaranteed payments" = $100,000
    Employee A wages = $60,000
    Employee B wages = $55,000
    Employee C wages = $44,000

    Owner A says, "let's give everyone 15% of their salary in profit sharing".
    Owner A = $100,000 * 15% = $15,000 profit share into 401K
    Employee A wages = $60,000 * 15% = $9,000 profit share into 401K
    Employee B wages = $55,000 * 15% = $8250 profit share into 401K
    Employee C wages = $44,000 * 15% = $6,600 profit share into 401K

    That is a total of $38,850 shared equally amongst the eligible 401K employees. That leaves $61,150 of profits left on the company profit & loss statement.
    Note: The maximum profit sharing allowed is 25% of wages, not to exceed the aggregate 401K contribution maximums (see "What are the Contribution Maximums" above).
    12What If The Fellow Travelers 401K Closes?
    If Fellow Travelers, the Plan Sponsor, closes / ceases to exist, the 401K would continue to exist undisturbed. Each employee's account would continue to be maintained by the custodian (i.e. bank) & third party administrator (US Retirement Plan Company). No NEW contributions could be made. However, everything else would continue as is. Employee fees would still be paid from account balances, but no employer fees would be charged. Each sub-employer group could choose what to do next... either convert their portion of the 401K into a new 401k plan, or leave the 401K as it is and not make any new 401k contributions.