Group 401(k) Owner and Employees
Q: What is the Group Self Directed 401(k) Plan?
A: The Group Self Directed 401(k) Plan is designed for business owners who have employees (other than spouses and partners) who would like to save for retirement AND self direct their retirement accounts. While many self-employed business owners with no employees (other than owners and spouses) have been able to use solo 401(k)s to self-direct, business owners with employees have been unable to both save for retirement AND self direct their retirement accounts. Sure, there are many places you can establish a 401(k) for you and your employees but it has been virtually impossible to use a 401(k) with standard mutual fund and stock investment options AND self directed investment options such as real estate, LLCs, and precious metals. The Navigator Group Self Directed 401(k) provides what has been impossible to find, a self directed 401(k) solution for business owners with employees.
Q: What if I have a 401(k) already in my business but I can’t self-direct? Can I move it Navigator to self-direct?
A: Yes, an existing 401(k) plan can be moved to the Nationwide and Navigator systems and can utilize our pre-approved Self Directed Group 401(k) Plan. Navigator may be able to become the third party administrator with your current platform and record-keeper to facilitate the self directed investment. It all depends on your current plan, and the platform you use.
Q: How do investments from the Group 401(k) work?
A: Under our IRS pre-approved Group Self Directed 401(k) Plan, each participant in the 401(k) will have their own account and each participant (employee who decides to participate) decides what they want to invest their account in. Do they want to invest in stocks or mutual funds or do they want to self direct? Each person decides for themselves and their account investments are held and treated separately from other participant accounts. For standard investments like mutual funds and stocks, the investments are handle through Nationwide. For self directed investments like real estate or LLCs, the funds are transferred from Nationwide to Navigator and handled by Navigator.
Q: If I have employees who participate in the Group 401(k), do I have to contribute into their accounts?
A: No. As the employer, you can but you are not required to do so. You can establish a 401(k) that is only comprised of employee contributions and each employee (owners and employees) would decide how much to contribute to their account and such contributions would be made from payroll and would come from each person’s earnings. Each participant can contribute up to $18,000 per year (roth or traditional) into their 401(k) account. There are also some common matching options where you can contribute more as the employer to your own account but as the business owner you’ll need to offer that same matching option to all your employees who qualify to participate in the 401(k). The most common employer matching format is known as a safe harbor 401(k) and that format can be adopted with the Group 401(k).
Q: What does Nationwide do and what does Navigator do? Why do I need both Involved?
A: Nationwide is known as the platform and their platform and system is where you will make contributions, send rollovers, process distributions, requests loans, and where each participant decides how to invest their account (e.g. what mutual funds or stocks). Navigator acts as a third party administrator and handles required annual IRS 5500 filings and plan amendments. Navigator also handles any participant’s account that wants to self direct.
Q: Can you give me an example of how this works?
A: Let’s take Sally the Dentist as an example. Sally has 10 employees. 8 who are full time and 2 who are part time. Sally has been looking to establish a 401(k) or other retirement plan for herself but is interested in self directing her account while her employees would be most interested in standard investments such as mutual funds and stocks. Because Sally has other full time employees, she cannot use a solo 401(k). However, Sally can establish a Group Self Directed 401(k) in her dental business. The 401(k) will have an account for her and one available for each of her full-time employees (defined at about 20 hours a week, and over 1 year of service) who desires to have a 401(k) account. Sally can contribute what she wants to her 401(k) account up to $18,000 per year and her employees can contribute up to $18,000 a year from their wages. Contributions are made to Nationwide. Each person will decide how to invest their own account. Sally wants to self direct her funds into a real estate deal in which case her funds will transfer from Nationwide to Navigator and Navigator will administer the self directed real estate investment. Let’s say 4 of her employees that qualify decide to participate in the 401(k) and they simply want to invest in mutual funds. Their contributions are made from their payroll checks and go to Nationwide and are invested from their Nationwide account into mutual funds.
Q: Can I have a Roth 401(k) account?
A: Yes, you can have a Roth 401(k) account. Each participant can decide to contribute traditional funds or roth funds or a combination of both. You can also convert traditional dollars to roth dollars.
Q: What are the requirements to rollover an existing retirement account into my 401(k)?
A: You can rollover almost every retirement account without penalty into your account in the Group 401(k) (traditional IRAs, prior employer 401(k)’s or 403(b) plans, etc.). Once odd exception to this is that Roth IRAs cannot be rolled over to your Roth 401(k) account.