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Investor Insights Blog

Why a 401(k) May Not Be the Best Solution For Your Small Business

June 23, 2020
Guide to Small Business Accounts

Is a third-party administrator required? 

This is a vital question businesses should ask of any plan before enrolling. A 401(k), for example, must meet IRS guidelines and this plan is best administered by a third-party administrator who thoroughly understands the compliance expectations. 

Plans such as SEPs, SIMPLE IRAs and solo 401(k)s have no such need. You could still administer the plan through a third-party administrator if you choose to as it ensures you receive the maximum benefit from the plan.

It’s important to differentiate which plans will require you to use such a service and which plans allow for it as an additional benefit. 

Equity Trust Company is a directed custodian, preparing account statements for you, and reports for the IRS. Our role is to carry out an account owner’s direction, much like a bank carries out payment instructions when an account owner writes a check. We do not research or analyze your investment choices and do not offer opinion or advice on investment decisions. You should consult a trusted financial professional such as your accountant, financial planner or lawyer before making an investment.

In conjunction with the Retirement Industry Trust Association, we have compiled governmental and industry resources to help you, the self-directed investor, in making your investment decisions. As a reminder, all investments carry risk including loss of principal. No governmental agency or IRA custodian approves or guarantees investments.

Yes. Some IRA custodians only allow investing in stocks, bonds and mutual funds; however a self-directed IRA custodian, such as Equity Trust, allows those types of investments in addition to real estate, notes, private placements, tax lien certificates and more.


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