FAQ

For Employers

Why do so few small businesses offer a 401(k) plan to their employees?

Historically, it was both costly and time-intensive to offer a 401(k) plan. In addition to high fees, traditional plan providers required the employer to manage all ongoing administration of the plan.

Now, using modern technology, Captain401 is able to sync with your payroll provider and serve as the external HR function for everything 401(k)-related for your company in an affordable way. On top of that, we also provide personalized investment advising for all employees.

More information: Why Small Business Owners Don’t Offer a 401(k) (But Why They Should)

What investment services do you provide?

Captain401 is approved by the SEC as a registered investment adviser. We allow all employees to follow the best practices of investing by providing personalized investment recommendations for each employee. We follow time-tested investment theories espoused by the world's leading financial economists: modern portfolio theory, efficient market theory, and the capital asset pricing model.

Many employees do not know how to choose their own investments, and make big mistakes that cost them hundreds of thousands of dollars in investment gains. You want your 401(k) to be a benefit to your employees, and the best way to do that is to ensure that employees get the guidance they need to make the most of their 401(k). We make sure that they are well-diversified in different asset classes and rebalance their portfolios automatically.

If employees decide that they want to make their own investment decisions, they can simply elect to become solo traders in our platform and buy and sell funds directly.

What does "fiduciary duty" mean?

Captain401 is a plan fiduciary, and you have the option to choose between 3(38) or 3(21) in terms of fiduciary responsibility. According to the US Department of Labor (DOL):

Fiduciaries have important responsibilities and are subject to standards of conduct because they act on behalf of participants in a retirement plan and their beneficiaries. These responsibilities include:

  • Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them;
  • Carrying out their duties prudently;
  • Following the plan documents (unless inconsistent with ERISA);
  • Diversifying plan investments; and
  • Paying only reasonable plan expenses.

The DOL is currently trying to pass legislation mandating that all retirement plan providers must be plan fiduciaries—currently, some estimate that 90% of plan providers are NOT fiduciaries.

How soon can I offer a 401(k)?

Setup is completely online and will take around 15 minutes with Captain401. We send all documents electronically for approval and eSigning. After everything is finalized, the process might take 30-45 days before the plan is ready to launch, during which time we handle all filing and compliance and you do not have to do anything.

Do you offer any training?

Yes, we believe in financial literacy education and fully informing employees about their retirement plans. Once your company’s 401(k) plan is ready to launch, we can conduct an on-site or webinar training presentation followed by an open Q&A, at no extra charge.

Our customer support team is also available by e-mail ([email protected]), phone (1-855-622-7824), and online chat.

What’s the difference between a 403(b) and a 401(k)?

Captain401 also offers 403(b) plans. A 403(b) plan is similar to a 401(k), but only available for public education organizations, some non-profit employers, cooperative hospital service organizations, and self-employed ministers in the United States. If your company falls into any one of these categories, we would be happy to assist you in setting up a 403(b).

More information: 403(b) Compared to 401(k): Retirement Plans for Non-Profits


For Employees

What's the difference between a Roth 401(k) and a Traditional 401(k)? How should I choose?

Captain401 gives employees the flexibility to contribute to either or both a Roth and a Traditional 401(k), at no extra cost to the company. A Roth 401(k) allows employees to contribute funds on a post-tax basis, compared to pre-tax contributions for a Traditional 401(k).

Roth could make sense for employees if their tax bracket will be the same or higher in retirement than it is currently. This usually applies to younger employees who are early in their careers. Income contributed to a Roth 401(k) is taxable the year in which it is earned, while earnings and interest gains remain untaxed even upon withdrawal.

Employers can match a Roth plan; however, employer contributions cannot receive Roth tax treatment and must be allocated to a pre-tax account, usually a Traditional 401(k).

More information: Roth 401(k) vs. Traditional 401(k)

I already have an IRA. Why should I contribute to a 401(k)?

IRA stands for Individual Retirement Account and is available regardless of employment status, including to those who are unemployed or self-employed. Anyone who has earned income and is below the age of 70 ½ can contribute to a traditional IRA.

A 401(k) is a benefit that can only be offered through an employer. Once an employee is enrolled in a company-sponsored plan, a 401(k) is easy and passive—automatic deductions are taken from each paycheck. There is no income restriction for contribution to a 401(k), but IRA has an income cap.

Additionally, a 401(k) has more than 3x the contribution limit of an IRA. The annual limit for a 401(k) is $18,000/year versus $5,500/year for an IRA for those under the age of 50, and $24,000/year versus $6,500/year for those over the age of 50.

More information: 401(k) vs. Traditional IRA vs. Roth IRA vs. myRA

Will I be able to choose what funds my money is invested in?

Yes, if you decide to opt out of our investment advising, you are free to buy and sell funds on our platform. If you want to choose your own funds, you can do so from a list that spans all the major asset classes and risk categories, pre-determined by your employer.

However, keep in mind that our investment advising allows all employees to follow the best practices of investing without extra research or work on your part. We will balance your portfolio based on the time-tested investment theories espoused by the world's leading financial economists: modern portfolio theory, efficient market theory, and the capital asset pricing model.

I had a 401(k) with my previous employer. How will I transfer that over to you guys?

Captain401 supports rollovers, and we will help you with the process, step-by-step. When you log into your Captain401 account, click on your name and in the drop-down menu, select “Rollover an Old Account.” This will initiate the rollover process and give you specific instructions for your previous provider.

Note that, unfortunately, the IRS prohibits rolling over a Roth IRA into a 401(k).

Can I take out a loan on my 401(k)?

Yes, however it is usually inadvisable and uncommon for employees to take out loans from their retirement plan. They can usually get a better rate on loans from almost any other source.

The biggest issue for employees is that they would be paying loans back with after-tax dollars, which is effectively double taxation, as they pay taxes again once the money is withdrawn from the 401(k). The government tries to dissuade people from dipping into their nest eggs, just as they try to incentivize contributions into a 401(k).

In addition, the employee would pay interest rate of prime plus 1%, along with an origination fee of $100 and an annual maintenance fee of $75–both fees are charged by the Third Party Administrator.

The loans must be repaid within 5 years and are subject to other restrictions. If the employee leaves the company, the loan is due in full within 60 days.

More information: Why It Doesn’t Make Sense to Take a Loan from Your 401(k)