401K Plan for Household Employees: FAQs

Looking for a recruiting advantage over other household employers? Want a great way to keep your high-quality nanny or other employees? Offering a 401k plan for household employees is an easy, affordable way to attract and retain the best workers while letting them save for retirement.

GTM clients can offer their employees a SIMPLE 401k plan. Here are some FAQs about the plan:

Q. HOW DO I ENROLL?
Once your family/employer adopts the Plan you can enroll online. You will choose the amount you wish to defer pre‐tax from your compensation, how you would like to invest your contributions, and whom you would like to name as your account beneficiary. You will receive an email confirmation of your choices.

Q. WHAT HAPPENS IF I DON’T MAKE AN INVESTMENT CHOICE?
You should complete the online enrollment process if you and your employer are making contributions to the Plan on your behalf. If you don’t complete the enrollment process and select your own investments, your account will be invested in the Plan’s QDIA – Qualified Default Investment Alternative. The QDIA is the Vanguard Target Date Retirement Fund with the target date closest to your actual retirement date, or when you reach age 65. You may change this at any time.

Q. CAN I GET INVESTMENT ADVICE?
You have the ability to self‐direct your investments from a list of monitored, low-cost mutual funds. There are no restrictions on making changes and no commissions assessed when you trade. Direct Retirement Solutions, the Plan’s Investment Advisor is available to counsel you individually if you would like advice on which investment options offered within the Plan are suitable for you.

Q. HOW DO I ACCESS MY ACCOUNT INFORMATION?
You will have access to a quarterly benefit statement electronically each quarter. You may also speak to a customer service representative at Benefit Consultants Group, the Plan’s Third Party Administrator in English or Spanish from 8:00 am – 8:00 pm EST, M‐ F with questions on your account at 1-800-524-4015.

Q. IF I TERMINATE MY POSITION WITH MY FAMILY WHAT HAPPENS TO MY 401K?
The SIMPLE 401k plan stays with you until you close your account. Upon your next household position, you may elect to continue contributing to your plan if you are employed by a family who uses GTM as their payroll service provider and adopts the Plan.

Q. WHY IS YOUR EMPLOYER PARTICIPATING IN A 401(K) PLAN?
Your Employer is participating in this Plan so that you may save for retirement. This Plan is a type of qualified retirement plan commonly referred to as a SIMPLE 401(k) Plan. As a Participant under the Plan, you may elect to contribute a portion of your compensation to the Plan. In addition, your Employer will make up to a 3% matching contribution to the Plan on your behalf.

Q. WHAT ARE SALARY DEFERRALS AND HOW DO I CONTRIBUTE THEM TO THE PLAN?
As a Participant under the Plan, you may elect to reduce your compensation by a specific percentage or dollar amount and have that amount contributed to the Plan on a pre-tax basis. This amount is referred to as a salary deferral. Your taxable income is reduced by the deferral contribution so you pay less in federal income taxes. Later, when the Plan distributes the deferrals and earnings, you will pay the taxes on those deferrals and the earnings. Therefore, federal income taxes on the deferral contributions and on the earnings are only postponed. Eventually, you will have to pay taxes on these amounts. However, the amount you defer is counted as compensation for Social Security taxes.

Q. WHEN WILL I RECEIVE PAYMENTS FROM THE PLAN?
The Plan is designed to encourage you to stay with the employer until retirement. Payment will generally occur at your Normal Retirement Date unless you postpone your actual retirement. Your Normal Retirement Date is the first day of the month coinciding with or next following your Normal Retirement Age. You will attain your Normal Retirement Age when you reach your 65th birthday.

Q. HOW MUCH WILL I BE PAID WHEN I RETIRE?
The amount you are paid when you retire will be based upon the amount of money your Employer has put into the Plan for you (including your salary deferrals), plus or minus any earnings or losses.

Q. HOW WILL PAYMENTS BE MADE WHEN I RETIRE?
All distributions from the Plan will be made in a single lump-sum payment. If your vested account balance exceeds $5,000, you must consent to the distribution before it may be made. You should review the Article in the SPD entitled “Benefits and Distributions Upon Termination of Employment” for a further explanation of the rules associated with the payment of benefits.

Q. WHAT IF I STOP WORKING BEFORE I RETIRE?
The account may be rolled over to another qualified plan or IRA once they qualify for a distribution.

Q. WHAT IF I DIE BEFORE I RETIRE?
Your beneficiary will be entitled to 100% of your interest in the Plan upon your death. If you are single, you may name anyone you like to be your beneficiary. If you are married, your spouse is your beneficiary with respect to 100% of your death benefit unless you and your spouse name someone else as your beneficiary.

Q. CAN I WITHDRAW MONEY FROM THE PLAN WHILE I’M STILL WORKING?
The Plan is designed to pay benefits at retirement. The Plan does not allow payments to be made while you are still working for the Employer.

Q. HOW IS A 401(K) IS BENEFICIAL VERSUS ANOTHER RETIREMENT PLAN?
This SIMPLE 401k Plan is similar to other retirement plans. Money goes in from the employee pre-tax and the money from the employer and employee grows tax-deferred.

Q. ONCE AN EMPLOYEE ENROLLS HOW LONG DOES IT TAKE ON AVERAGE TO SET UP AND HAVE FUNDS START PULLING FROM WAGES?
One to two payrolls.

Q. IS IT POSSIBLE TO DO MORE THAN THE STANDARD MATCH OF 3%?
No.

Learn more about this retirement plan for your employees, or contact us at (800) 929-9213 for more information.