Most employees in large and mid-size companies have access to 401(k) retirement plans. Most employees in small companies don’t.

During the salad days of the technology boom, it may not have been a concern. Venture dollars, stock options, IPO bonanzas, and rich profit-sharing plans filled the gap nicely at many companies. With those perks a memory, jitters about a retirement lifestyle fueled only by Social Security payments are surfacing. Very few small-company employees have pensions, and a dwindling number are covered under union retirement plans. The result could be a generation that grooms golf greens rather than one that putts on them.

It doesn’t have to be so.

Setting up a 401(k) is "unbelievably easy," says Dorann Cafaro, principal in Red Bank-based the Cafaro Group (800-444-4866), a UBS Financial Services company that does nothing but set up retirement plans. Cafaro has been advising employers on providing retirement savings vehicles for 28 years, and says that the costs, recently subsidized by the federal government, have never been lower.

"The more unique the company, the more they think `it isn’t for me,’ but there is no wish list an employer can come up with that I can’t meet," she declares.

In fact, if employees want this benefit, and their employer cannot afford the set-up and maintenance fees, a plan can be set up that will roll the costs over to the employees.

Tim O’Brien, CEO of ExpertPlan (, an East Windsor company that lowers 401(k) costs by putting account management online, says that the company gets more referrals from Cafaro than from any other agent. Told this, she laughs, and says that any number of retirement plan platforms would say the same thing. Hers is a specialized niche, and she emphasizes that it is her job to join employers — and their workforces — with just the right platform.

ExpertPlan is right for many employers, she says, because its costs are low and because it is what she terms an "open architecture" platform. This means that it allows employers to offer their employees investment vehicles from a great number of IRS-approved mutual fund families. Another advantage for some employers is that their workers have access to their plans on the Internet, where they can easily make changes in contribution levels, switch among investments, and request loans. But while this is an advantage in a tech-savvy workforce, Cafaro points out that it could be a liability in workplaces where employees do not have access to the Internet.

Set up of an ExpertPlan 401(k) varies by the size of a workforce. For a five-person shop, the cost would be about $750. For a company of 100 people, it would be $1,250. In each case, there would be an additional $4 cost for each participant. Yearly maintenance adds about $750, plus $30 per participant, and Cafaro says that most participants pay that $30 themselves.

While ExpertPlan’s open architecture means that it does not have strategic alliances with financial firms, other platforms catering to small business do. An example is payroll giant ADP ( Cafaro says ADP has a relationship with Merrill Lynch, and therefore only offers that company’s funds. ADP’s 401(k) plan set up fee is about $3,200, says Cafaro. An advantage could be that the company is able to integrate 401(k) transactions with payroll and other employee benefit programs. Also, ADP, like many other platforms, gives participants access to their information by phone as well as through the Internet. Paychex (, the other payroll giant, also offers 401(k) set up and maintenance. Each company has extensive 401(k) information on its website.

A number of mutual fund companies also set up and administer 401(k) plans, although many outsource some or all recordkeeping chores. In fact, ExpertPlan’s O’Brien says that his company handles these details for some 70 funds, including American Funds and Delaware Funds.

Coincidentally, Cafaro names American Funds ( as a financial house whose 401(k) plans cater to small businesses. She also names MFS (, and Enterprise ( as companies that cater to the needs of small employers.

For those who want a bare bones approach to 401 (k) set up and administration, there are even all-in-one online options. One is 401(k) Easy (, which charges about $600 for set up. Its website leads employers through choices, which include a participant-directed brokerage account from a number of companies, including Charles Schwab, Cigna, and Fidelity, or employer fund choices from among more than 200 no-load mutual fund families. It is even possible for employers to offer their workers a mix of the two options, and to include their own company’s publicly-traded stock in the mix.

401(k) Easy offers participants in its plans an unusually large choice of investment vehicles. Cafaro says that most employers choose plans that give their employees a choice of about 10, usually of graduated risk, going from money market funds to aggressive equity funds. Employees generally can choose to allocate their contributions among several choices.

401(k) Easy offers telephone consultants, but any employer in search of a more in-depth analysis of all the options might do well to contact a financial advisor.

Even the basics of the plans can be a bit confusing, and employers have great latitude in designing one that fits perfectly. First of all, an employer can choose to contribute, or not, and he can do so in a number of ways. Cafaro explains that it is possible to match some or all of an employee’s contribution, or to put money into a plan regardless of whether an employee contributes. It is possible to match an employee’s contribution dollar-for-dollar, or to choose any other amount, perhaps 10 cents on the dollar. Matching contributions can be made in each paycheck, or they can be made at the end of the year. A plan can be set up in such a way that employers can give greater matching amounts to some employees than to others, and can make smaller matches — or none at all — in a lean year.

While employees are vested in the sums they contribute immediately, employers can choose to vest employees in the money they contribute right way, or gradually, generally over a period of three to six years.

Part-time employees can be included, or not, although anyone who works 1,000 hours a year, and is not covered by a union agreement, is generally eligible under federal rules.

Employers who already have a profit sharing plan, or another deferred compensation plan, can add a 401(k) component to it.

While the standard 401(k) plan is the one with which most people are familiar, there are variations. One is the 401(k) Simple. Its advantage, as its name implies, is that it is a snap to set up and to administer, and that it does not carry all the recording chores of a standard 401(k). Possible disadvantages are that contributions are capped at $8,000 a year, as compared with the $12,000 that can go into a standard 401(k), and that employers must make contributions on behalf of all eligible employees.

A popular variant of the 401(k), says Cafaro, is the 401(k) Safe Harbor. Under this retirement plan, key employees can contribute as much as they like, up to the federally-mandated limit, even if other employees contribute relatively little. This is important because the IRS imposes non-discrimination tests on 401(k) plans to ensure that they are not benefiting highly-paid employees, presently those making more than $90,000, more than lesser-paid employees. Under the Safe Harbor, employers contribute 3 percent of every employee’s salary to a 401(k) in place of meeting the non-discrimination test.

Cafaro says this retirement savings vehicle is especially valuable in start-ups where there were just two or three employees, often founders, before the company started to grow. The value of their 401(k) accounts could be so much greater than those of new employees that they could be barred from making the maximum contribution allowed under 401(k) rules without the Safe Harbor provision.

Still another twist on the 401(1) is a solo version intended for those who are self-employed. Advantages over an IRA include higher contribution caps and the ability to take a loan against the retirement money.

An excellent guide, in chart form, to all tax favored retirement plans is published by the Department of Labor. It is available online at

Even with the help of a neatly-drawn chart, making choices within these plans may seem confusing, but Cafaro says she can quickly work through the options with employers, narrowing the choices according to their circumstances. She can also give employers the good news that the federal government, desperate to increase retirement savings, now provides substantial tax credits and deductions for plan set up and for the first three years of plan maintenance. Matching funds put into employees’ accounts are also tax deductible.

Beyond sparing their workers an old age of watching their big-company counterparts play through as they repair divots, Cafaro points out that putting a plan in place is a vital tool in recruiting and retaining the best workers when the economy next enters a boom cycle.

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