Capital Investment Services
Capital Investment Services


An Important Decision

As an employer and sponsor of a 401(k) plan, your company shoulders a major responsibility. You must listen to the needs of your employees and then select the appropriate service provider at a reasonable cost, determine the optimal plan design provisions, choose and monitor investments, keep up with legislative changes, ensure your plan is administered properly, and educate and inform plan participants. All of this hopefully results in a plan that inspires employees to reach their retirement dreams, while helping you recruit and retain valuable associates.

Unless your company has individuals with 401(k) expertise who are solely dedicated to managing your employee retirement plan, you should consider hiring a financial advisor who specializes in 401(k) plans and is as dedicated to your needs as you are to your employees.

Why Choose Capital Investment Services
As your financial advisors, we’re objective and fully independent in making recommendations to you and your employees. Because we don’t offer a proprietary “in-house” 401(k) plan, we have no incentive to sell any specific product, but work with virtually all the different product and service providers in the 401(k) market. Our goal is to build and foster long-term relationships with you as well as with your company and its employees.

Components of a Successful Plan
401(k) plans have many different moving parts that must be coordinated to run smoothly and meet the needs of the organization sponsoring the plan. If the different components don’t fit well together or match your needs, the results may include incorrect depositing of funds, inaccurate and untimely participant information or IRS reporting, and/or employees who don’t understand, appreciate or participate in the plan.

In general, all 401(k) plans have the same basic objective – to serve as a retirement savings plan for employees. Yet there are many different 401(k) plan models that suit a wide range of specific company needs. The 401(k) advisor’s role is to help you set reasonable expectations, select the most appropriate plan, then manage all the components on an ongoing basis to help ensure a successful plan.

The Role of the 401(k) Advisor
An effective 401(k) advisor is much like a coach, coordinating the work of those with specific expertise in certain areas. Since you have the overall responsibility for all the various plan functions, it’s important that you select someone who can manage the whole, rather than just certain parts. In general, the role of a 401(k) advisor can be segmented into:

  • Clearly defining the parameters of the specific client relationship and establishing reasonable expectations for both the client and the advisor.
  • Evaluating and selecting service providers.
  • Performing plan design consulting, including matching contribution formulas, cross-tested profit sharing allocations, qualification and eligibility issues, and merger and acquisition situations.
  • Assisting in the design of an investment policy statement (IPS), which outlines a detailed, prudent plan of action for the trust’s investment managers and advisors to follow.
  • Managing the implementation and transition to new provider(s).
  • Serving as the primary contact for all aspects of plan servicing.
  • Providing ongoing plan reviews.
  • If managing employee communication and investment education. from the provider are necessary due to multiple company locations, we will coordinate those efforts. We also provide supplemental educational materials if desired.

Frequently Asked Questions
Can a profit sharing plan be combined with a 401(k) plan?
A 401(k) plan is simply a profit sharing plan with a provision allowing employee salary deferrals. Most 401(k) plans provide employer matching contributions based on a participant’s contribution, with an additional option for a profit sharing allocation. Although most 401(k) plans use a salary ratio formula for profit sharing plan allocations, any of the other formulas could be used.

What are the costs of implementing and maintaining a profit sharing plan?
Cost can vary significantly depending on the design complexity of the plan, the number of employees and the structure of the investment portfolio.

Can an IRA be rolled into a profit sharing plan?
Yes. An IRA can be rolled into a profit sharing plan as long as the profit sharing plan permits such a rollover.

Do all employees have to be included in a plan?
Certain employees may be excluded, but strict coverage rules prevent the plan from discriminating in favor of highly compensated employees.

What is the difference between a profit sharing plan and a SEP plan?
The profit sharing plan allows vesting schedules, while SEP plans require 100% immediate vesting. A profit sharing plan can require employees to work at least 1,000 hours to share in the contribution, but an SEP plan covers all eligible employees, regardless of hours worked.

What are the administrative requirements?
All profit sharing plans are subject to IRS reporting requirements. This includes keeping the plan up to date with new laws, performing nondiscrimination tests, filing an IRS Form 5500 return each year, and providing benefit statements and other plan information to participants at least annually. Self-employed persons with no employees are not required to file returns until the plan has $250,000 in assets. A professional pension plan administrator should usually be retained to perform these annual reporting functions.