Frequently Asked Questions

The right plan depends on your business size, profitability, employee demographics, and long-term goals. Here is a quick orientation to the most common options:

• 401(k) Profit Sharing Plan: Flexible employer contributions and primarily employee-funded. A solid starting point for many growing businesses.
• Safe Harbor 401(k): Best when owners or highly compensated employees want to maximize their contributions and the business is willing to make a 3% to 4% employer contribution.
• Defined Benefit or Cash Balance Plan: Ideal for high-earning owners (typically age 45 and older) who want to contribute well above standard 401(k) limits.
• Age-Weighted or Cross-Tested Profit Sharing: Works well when the owner is older than the average employee or wants to direct a larger share of contributions to specific groups.

KB Pension Services specializes in matching plan design to your unique business profile, often combining plan types to maximize tax savings.

Switching TPAs is more straightforward than most plan sponsors expect, and we handle the majority of the work. A typical conversion includes:

• Reviewing your current plan documents, recent Form 5500 filings, and most recent compliance testing.
• Coordinating with your current provider for a clean data handoff.
• Restating or amending plan documents as needed.

Most conversions can be timed to a plan-year boundary (typically January 1) with no disruption to participants or contributions.

Each plays a distinct role in your retirement plan:

• The recordkeeper tracks participant balances and processes transactions.
• The financial advisor helps select investments and educates participants.
• The payroll provider transmits contributions from each pay period.
• The TPA designs the plan, performs annual compliance testing, prepares plan documents and government filings, and ensures the plan operates within IRS and Department of Labor rules.

Think of the TPA as the architect and compliance specialist who holds the entire plan together. Without one, your plan can drift out of compliance even when contributions are flowing correctly.

Costs vary based on plan type, the number of eligible employees, and complexity. For example, Defined Benefit and Cash Balance plans require an actuary, which adds to the fee. Most TPA engagements include a one-time setup fee and an annual administration fee, often with a small per-participant component.

The good news: under the SECURE 2.0 Act, businesses with up to 50 employees can claim a tax credit covering 100% of qualified startup costs, up to $5,000 per year for the first three years. For many businesses, that credit fully offsets the cost of administering a new plan in its early years.

Roughly 30% of small business 401(k) plans subject to testing fail at least one test each year, so this is a common situation with manageable solutions. If your plan fails the ADP, ACP, you generally have 2.5 months after the plan year ends to correct it without penalty.
Common fixes include:

• Refunding excess contributions to highly compensated employees
• Making additional Qualified Nonelective Contributions (QNECs) for non-highly compensated employees
• Redesigning the plan (for example, adding Safe Harbor) so failures do not recur

KB Pension Services can perform interim testing throughout the year, flags issues early, and recommends design changes to keep your plan compliant year after year, before failed tests force unwanted corrections.

A Third-Party Administrator (TPA) is a specialized firm that handles the design, compliance, and administrative work behind your company's retirement plan. That includes preparing plan documents, calculating contributions, performing IRS-required testing, filing government reports, and maintaining accurate recordkeeping.
While your payroll company or investment provider handles transactions, a dedicated TPA like KB Pension Services makes sure your plan is built correctly, stays compliant with ERISA and IRS rules, and is optimized for your business goals.

Form 5500 is the annual return that most ERISA retirement plans must file with the IRS and the Department of Labor. It reports the plan's financials, participants, and operations.
Key facts to know:

• For calendar-year plans, the deadline is July 31, with an automatic 2.5-month extension available (pushing the deadline to October 15) by filing Form 5558.
• Plans with 100 or more participants generally require an independent CPA audit attached to the filing.
• Penalties for late or missed filings can reach $250 per day from the IRS, up to $150,000, plus additional Department of Labor penalties.

Although KB Pension Services prepares Form 5500 for our clients, the plan sponsor (your business) is the legal filer and signs the form. We make sure it is accurate, complete, and submitted on time, every year.

Both plans allow your team to defer pre-tax or Roth contributions, but they handle IRS compliance very differently.

A traditional 401(k) is subject to annual ADP and ACP nondiscrimination testing. If too few rank-and-file employees participate, owners and highly compensated employees may have their contributions limited or refunded back to them at year-end.

A Safe Harbor 401(k) automatically passes most of those tests in exchange for a required, immediately vested employer contribution. The most common formulas are:

• A 3% nonelective contribution to all eligible employees,
• An enhanced match of 100% on the first 4% deferred, or
• A basic match of 100% on the first 3% deferred, plus 50% on the next 2%.

For business owners who want to consistently contribute the maximum each year, regardless of how much rank-and-file employees defer, Safe Harbor is usually the better fit.

Under the SECURE 2.0 Act, eligible small businesses can claim several substantial tax credits when launching a new retirement plan:

• Startup credit: Up to 100% of qualified plan setup and administration costs (up to $5,000 per year for 3 years) for businesses with 50 or fewer employees, or 50% for businesses with 51 to 100 employees.
• Employer contribution credit: Up to $1,000 per employee (earning less than $100,000) for the first 5 years, phasing down over time.
• Auto-enrollment credit: An additional $500 per year for 3 years if your plan includes automatic enrollment.

Combined, these credits can exceed $16,000 over the first three years and often eliminate the net cost of starting a plan.

The best time to switch TPAs can depend on multiple items:

• What services have you already paid for?
• Is there timing requirement in your Service Agreement?
• Are there any termination fees charged by your current provider to change TPAs?
• Will the plan also be changing the Recordkeeper?

We can work with you to determine the appropriate timing of a TPA change.

These plans are ideal for established businesses with steady profits where the owner (typically age 45 and older) wants to contribute significantly more than 401(k) limits allow. Annual tax-deductible contributions can range from $100,000 to $300,000 or more, depending on age and compensation.

They work especially well for:

• Professional practices such as medical, dental, legal, and consulting firms
• High-earning solo or family-owned businesses
• Owners looking to accelerate retirement contributions later in their careers

Because these plans require actuarial calculations, ongoing funding commitments, and specialized compliance work, partnering with an experienced TPA is essential. KB Pension Services regularly designs and administers Defined Benefit and Cash Balance plans, often pairing them with a 401(k) Profit Sharing Plan for maximum tax efficiency.