Streamlined 401(k) plan a
solid retirement benefit for
mutual funds as the primary investment option.
The plans were just too costly and complex for
small businesses to justify.
Now ShareBuilder has addressed those
limitations with a 401(k) plan that is specifically designed for small businesses and includes
exchange-traded funds, or ETFs (see sidebar),
as a modern and possibly more ideal investment option.
ShareBuilder has also stripped away the hidden broker and transaction fees usually associated with 401(k) plans. What remains is a fee
structure that’s simple to comprehend, yielding
an easy understanding of just what the plan costs
a company and its employees.
By David Wight
COSTCO MEMBERS who operate small businesses may be interested in a new retirement
plan service being introduced nationwide by
Costco and ShareBuilder.
With the Small-Business 401(k) Plans,
ShareBuilder updates a popular retirement savings vehicle with the same kind of simple
presentation and implementation they have
demonstrated to Costco members for more than
five years with their online investing service.
provide a salary-reduction savings plan with tax
incentives for employees.
Changing retirement needs
A century ago a gold watch and, if lucky,
a modest pension were the rewards a worker
might expect after putting in a loyal 20 years on
a job. Of course, back then retirement didn’t
take much planning. Average life expectancy for
men in 1907 was 45 years, compared to 78 years
As life expectancy increased over the
decades, paying for retirement became a larger
concern, with big companies recognizing the
increasing expense and liability of pension programs. Today, fully funded company pensions
are nearing extinction.
Fortuitously, a new breed of savings vehicle
came along in the early 1980s that gained overwhelming popularity with both employers and
employees. The modern 401(k) plan—named
after paragraph (k) of Section 401 in the U.S. tax
code—was born out of an Internal Revenue
Service (IRS) loophole concerning employee
pretax salary reductions. Quickly sanctioned by
the IRS, 401(k) plans empower employers to
Companies find 401(k) plans to be a vital
tool for recruiting and retaining the right employees, especially in competitive fields. Prospective employees’ choice of employers often
depends in part on what kind of 401(k) is offered. A 401(k) is likely the largest asset many
people own, with the possible exception of
The numerous advantages that employees
find attractive about a 401(k) include the pretax
nature of this savings vehicle, which lowers taxable income, and the lack of any limit in how
much a plan will yield upon retirement. Flexibility to easily change contribution levels and
investment types is also a plus.
But probably the biggest draw for employees is the high contribution limits. Up to $15,500
per year in tax-deferred contributions can be
made, with those older than 50 years of age eligible for $5,000 in catch-up contributions.
The tax code extends a major benefit to
self-employed business owners, positioning a
401(k) as a no-brainer. Owners can contribute
up to $45,000 per year in tax-deferred retirement savings.
ShareBuilder excels in turning complicated
processes into simplicity. The key features of the
Small-Business 401(k) plans include:
■ Business savings of 50 percent or more
over traditional plans
■ Paperless plans, simple to set up
and manage online
■ Dedicated consultants to assist
employers with plan selection
■ Free access to a wide array of financial
planning tools and resources
■ Online access 24/7
■ Loans and hardship withdrawals
■ Automatic rebalancing of investments
■ Simplified business-tax filings
■ Access to 15 of the most popular ETFs
■ Exclusive pricing for Costco members
For more information, including cost savings, go to costco.com and enter “401(k)” in the
search box. You can also pick up a brochure in
any Costco warehouse. C
What are exchange-traded funds (ETFs)?
Retooling the model
For much of the past 25 years, 401(k) retirement plans were practical and affordable only
as employee benefits for big companies, with
EXCHANGE-TRADED funds (ETFs) are
baskets of stocks that track an index such
as the Standard & Poor’s 500 Stock Index.*
■ ETFs are not mutual funds.
■ ETFs are traded just like company
shares on a stock exchange.
■ ETFs provide the diversification of an
index fund plus the flexibility of a stock.
■ ETF prices change throughout
the day, fluctuating with supply
A prospectus for any ETF should be
read carefully before investing. It contains
important information, including objectives, risks and expenses.
ShareBuilder 401(k) is offered through ShareBuilder Advisors, LLC, a registered investment advisor that is not
affiliated with Costco. Costco will have no involvement in any account you establish with ShareBuilder.
*An index of stock prices issued by Standard & Poor’s
indicating price movements of the shares of 500 major
companies traded on the New York Stock Exchange.