Answers
Franchise 401(k) Questions, Answered
Straight answers to the questions franchise operators, association leaders, and their employees bring us, about plans, structures, fiduciary roles, costs, and tax credits.
401(k) Basics
General 401(k) questions
What is a 401(k) plan?
A 401(k) is a retirement savings plan offered through an employer. Employees contribute a portion of each paycheck, those contributions are invested, and employers may add a matching contribution. Account values fluctuate with the investments selected.
How is a 401(k) different from a savings account?
A 401(k) is an investment account, not a deposit account. The money is invested in the market rather than earning a fixed deposit rate, and account values can rise or fall. Contributions come automatically out of payroll, and employers often match a portion of what you put in.
Can I make Roth contributions to my 401(k)?
Yes. The plans we support offer both pre-tax and Roth (after-tax) contributions. Pre-tax lowers your taxable income now; Roth is taxed now but allows qualified withdrawals to be tax-free in retirement, subject to IRS requirements.
What can I invest my 401(k) in?
Participants choose from a curated investment lineup. A built-in portfolio builder guides the selection based on your time horizon and risk tolerance, and a financial advisor can also assist. All investing involves risk, including possible loss of principal.
Can I roll my IRA into my 401(k)?
Traditional IRA funds can generally be rolled into a 401(k) if the plan permits it. Roth IRA funds cannot be rolled into a traditional 401(k).
What happens to my 401(k) when I leave my job?
You generally have three options: roll it into your new employer's 401(k), roll it into an IRA, or leave the account in place (a small monthly fee may apply). Each option carries different costs, investment choices, and protections, so compare them before you decide.
For Operators
Franchise & multi-entity questions
Do franchise owners need a separate 401(k) plan for each location?
Not always. If locations operate under separate EINs that meet IRS controlled group thresholds, a
controlled group plan can cover them under one coordinated structure. For franchise groups and associations, a
Syndicate group plan lets each employer keep its own plan while sharing group pricing and administration.
How do controlled group rules affect franchise retirement plans?
If you own multiple businesses where ownership meets IRS thresholds, all employees across those businesses must be included in retirement plan nondiscrimination testing together. Whether the rules apply depends on your specific ownership structure. See our
controlled groups guide for the full rules.
What is a Syndicate group 401(k)?
A Syndicate is a group plan structure in which each employer keeps its own independent plan but benefits from group pricing and administration. Because each employer sponsors its own plan, there is no shared fiduciary liability between participating employers.
How is a Syndicate different from a PEP or MEP?
In a PEP or MEP, the sponsoring organization takes on fiduciary responsibility for the arrangement and audit thresholds are measured across the whole group. A Syndicate gives each employer its own plan, its own appointed fiduciary, and portability. See the full
Syndicate vs. PEP comparison.
What tax credits are available for franchise owners starting a 401(k)?
Up to 100% of administrative costs (up to $5,000 per year for three years), up to 100% of employer contributions (up to $1,000 per eligible employee for five years), and a $500 per year auto-enrollment credit for three years. These are federal statutory maximums. Eligibility and actual amounts depend on employee count, compensation, and contributions. Details on our
tax credits page.
What state retirement mandates apply to franchise owners?
Many states now require employers above a certain size to offer retirement savings access. Requirements vary by state, and non-compliance can carry penalties. Confirm your obligations in each state where you operate.
How long does a 401(k) plan conversion take?
Typically around 30 days to establish the new plan and 90 days to complete the full asset transfer from the prior provider. Contributions can generally continue uninterrupted during the process, though timelines depend in part on your prior provider. See the
conversion timeline.
What is a 3(38) investment fiduciary?
A 3(38) investment manager holds full discretionary authority to select, monitor, and replace plan investments. Responsibility for those investment decisions, and the liability attaching to them, shifts from the plan sponsor to the 3(38). It does not eliminate the sponsor's fiduciary status: the sponsor retains the duty to select and monitor the appointed fiduciary prudently, and may retain co-fiduciary responsibility in certain circumstances.
What is a 3(21) investment fiduciary?
A 3(21) co-fiduciary provides investment recommendations but holds no discretionary authority. The plan sponsor reviews each recommendation, makes the final decision, and remains the decision maker of record. Because the sponsor keeps that authority, it keeps the liability that attaches to it, sharing that liability with the 3(21) as co-fiduciary rather than transferring it. The practical trade is control against exposure: a 3(21) leaves investment decisions in the sponsor's hands, while a 3(38) takes both the decisions and the liability attaching to them.
What is a 3(16) plan administrator?
A 3(16) administrator assumes the day-to-day administrative responsibilities named in the service agreement, reducing the operational burden on the plan sponsor. Duties outside that written scope, and the duty to select and monitor the 3(16) prudently, remain with the sponsor.
Can I shelter more than the standard 401(k) limit as a franchise owner?
Often, yes. A coordinated
Profit Sharing and Cash Balance stack layered on top of a standard 401(k) may allow an owner to shelter well over $150,000 a year in taxable income, depending on age, compensation, employee census, and nondiscrimination testing results. Cash balance plans carry ongoing funding obligations and additional administrative cost, and require plan design built specifically around them.
Pricing & Fees
Cost & fee questions
What does a 401(k) plan typically cost a franchise owner?
A standard individual plan has no setup fee: $110 per month base, $2 to $7 per participant per month depending on headcount, and a 0.15% administrative AUM fee. Syndicate group plans are also $0 setup, at $110 per month base and $2 per participant per month. Controlled group plans add $30 per month for each additional EIN. GO-SOLO is $250 setup and $19 per month. The 0.15% administrative AUM fee includes 3(16) and 3(38) services, and every plan also includes our investment advisory services, with a fee based on plan size. See
full pricing for current figures on every tier.
Are there transaction fees for participants?
No. Under our published fee schedule, loan origination, distributions, QDRO, stop payment, and wire fees are all $0 for participants.
Is the fidelity bond included or extra?
Included at no extra charge. The ERISA fidelity bond is covered within the monthly base fee, alongside Form 5500 preparation and required participant notifications. There is no separate bond invoice.
Does the plan include Form 8881 completion for tax credits?
Yes. When starting a plan, our team completes IRS Form 8881 on the employer's behalf so the available startup tax credits can be claimed. Filing the form and confirming final eligibility rest with you and your tax preparer.
Answers on this page are general information, not tax, legal, or investment advice, and do not account for your specific circumstances. Tax credit and contribution figures are federal statutory maximums under current law; eligibility and actual amounts depend on employee count, compensation, contributions, census, nondiscrimination testing, and tax liability. Controlled group determination depends on your ownership structure. Setup and conversion timelines are typical, not guaranteed. Appointing 3(38) or 3(16) fiduciaries reallocates specified duties but does not eliminate fiduciary status. Consult your tax professional and ERISA counsel regarding your situation.
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