I'm the Owner, am I an Employee? & You Hired Employees, Now What? (Video)

I’m the Owner, am I an Employee? What Owners (Stock Investors) Need to Know About Their Status as an Employee:

  • Owner of a company must meet eligibility requirements to participate in the company’s retirement plan.
  • How an owner determines whether they are an actual employee:
    1. In order to qualify to participate in a company retirement plan, roll retirement monies into that plan, and invest those monies into your corporation, you must be a bona fide employee of the company sponsoring the retirement plan.
    2. Your contributions to the plan must be through a payroll deduction after you begin taking compensation (a paycheck).
    3. An owner should track the hours that they work.
      • Time tracking software
      • An Excel sheet
      • An owner can track their time by the day; they do not have to track their time by the hour.
  • Owners and compensation:
    1. It is common that owners do not initially take compensation.
    2. A corporation should generate revenues sufficient to support any compensation that an owner takes.
    3. When an owner takes compensation from the company it is very important to understand how they are being paid.
    4. To participate in the retirement plan, an owner must take compensation as a W-2 employee.
    5. If an owner takes a dividend from the corporation, all owners of the corporation Must also receive their rightful share of the dividend. Remember the 401(k) Plan is an owner of the corporation and must also receive a share of the dividend.

You Hired Employees, Now What?

  • Offering the plan to employees can be easy.
  • LRS will determine if an employee is eligible for participation in the retirement plan.
  • LRS will help enroll employees by creating a comprehensive enrollment kit for distribution to employees.
  • Enrollment in the plan must be offered to employees and submission of an enrollment form is required. This form is also provided by LRS.
  • The plan sponsor must provide employees with the retirement plan’s Deferral Agreement and Summary Plan Description.
  • It is required that a copy of the Summary Plan Description and Deferral form be provided to each new hire, on their date of hire. This information can be obtained through your Plan Administration Portal located at: https://www.leadingretirement.com/portal/.
  • Failure to offer the plan to eligible employees will result in a plan violation which requires the corporation to pay significant penalties, taxes, and costly time consuming filings with the Internal Revenue Service and Department of Labor.
  • Each employee has the right to roll outside or old retirement accounts into an organization’s retirement plan on their hire date.
    1. You cannot exclude part time employees from participating in the plan.
    2. Exclusions will be defined in the retirement plan’s legal documents.
  • If you hire any 1099/independent contractors, union workers, and/or leased employees please contact LRS to discuss any additional requirements there may be.
  • For additional information about who qualifies as an employee please visit this link: Plan Design for Non-Traditional Assets
  • Webinar: You Hired Employees, Now What?

Making Other Investment Options Available

  • Hiring employees can impact the retirement plan in a few ways
  • The Department of Labor requires that the plan offer employees a sufficiently diverse range of investment options.
  • If an organization employs individuals who are eligible or will soon be eligible to participate in the plan the Department of Labor requires a sufficiently diverse range of investment options.
    1. Under Department of Labor regulations there must be a least three different investment options available so that employees can diversify investments within an investment category (such as through a mutual fund).
    2. Participants must be given sufficient information to make informed decisions about the options offered under the plan.
    3. For more information: Fiduciary Responsibility: DOL.gov
  • LRS can help you ensure this diversification regulation is met by helping owners add more investment options to the retirement plan. Investment options include:
    1. Mutual Funds
    2. Stable Value
    3. Target Date Funds
    4. Money Market Accounts
  • When employees do not participate in the retirement plan, an owner’s contributions to the plan may be restricted. Please contact LRS with any questions you may have.
  • Additional information at:  Contributions Maximums

Lets Talk Investing: You Have Additional Monies in the 401(k) Plan

  • If your money is currently sitting in a cash state, earning no interest, asking us to invest your money in a money market fund would generate even a little bit of return, mutual funds-even more money.
  • It can also be helpful in the event of an audit by the Department of Labor or Internal Revenue Service.
  • Once investment options are made available, the plan is ready to receive further rollovers of your own outside investment accounts, as well as employee’s rollovers when hired and contributions when eligible to participate.

Consolidate Old Retirement Accounts

  • LRS will help you and your employees consolidate old retirement accounts into the new retirement plan.
  • If you or any of your employees have an IRA, a 401(k), 403(b), 457, pension plan, Defined Benefit Plan please (contact) LRS for assistance in transferring these accounts into the Retirement plan. LRS can help you consolidate all your retirement accounts into the new Retirement Plan.
  • Contact LRS for assistance in transferring these accounts in the new plan.

Our client services professionals are always happy to help answer any questions you may have. Call, Email, Live Chat, or meet with a Leading Retirement Solutions team member via Video – whichever method you prefer we can make happen. We strive to be accessible to our clients when you need us.

For questions about your 401(k) Plan contact our Client Services Team:  

For billing questions please contact our Accounting Team: