8 Things Advisors Should Know About 401(k) Tax Credits


The combination of new 401(k) plan tax credits and the owners of small businesses facing an increasingly challenging operational environment spells a tremendous opportunity for financial advisors aiming to grow their businesses and deepen existing client relationships.

In fact, according to Eric Droblyen, president and CEO of Employee Fiduciary, today’s 401(k) tax credits can offset most — if not all — of an advisor’s annual fee when a low-cost plan administration partner is used. This means that advisors can deliver significant added value to their small-business owner clients by helping them to launch a retirement plan, and the plan itself can become a source of future referrals.

Droblyen, whose firm is a national provider of small-business retirement plan administration, made this case during a recent webinar hosted by Broadridge. Over the course of little less than an hour, Droblyen mapped out key legislative changes that seek to incentivize the creation of more retirement plans by small-business owners.

For advisors to succeed in this space, he argued, they must first learn exactly which tax credits are available to eligible small businesses, how small businesses qualify for the different credits, which fees and expenses qualify for the startup credit and how to calculate the net post-credits cost of a plan — including advisor fees.

This may sound like a big hill to climb, Droblyen admitted, but the good news is that advisors can now partner with a robust and growing ecosystem of retirement plan providers in order to make plan creation a simple and painless process.

Advisors getting involved in the 401(k) plan marketplace, Droblyen argued, gain client loyalty and a new set of potential prospects, while the business owner client gains an important employee attraction and retention tool for a low cost. Employees also benefit by gaining access to a tax-advantaged opportunity to save for retirement in the workplace.

See the accompanying slideshow for a list of eight key insights about retirement plan tax credits and advisors’ role in plan creation that Droblyen shared during the presentation. Points have also been drawn from a recent Employee Fiduciary blog post on the same subject, penned by Brian Furgala.


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