Tag Archives: employee

Guest Post: 4 Things You Need to Know About Taxes and the Fiscal Cliff

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Taxes schmaxes – I am so over the fiscal cliff. These on-again off-again talks were insane and it’s crazy to me that the negotiations came down to the 11th hour. Post signing the legislation of the fiscal cliff deal, here are the top 4 things you need to know about taxes and the fiscal cliff.

1. All tax rates stay the same. Congress added a bracket. The only tax bracket that changes is the top rate, which was 35% and is now 39.6% for individuals making over $400,000 and $450,000 for married filing jointly.

2. No more payroll tax holiday for employees. The social security FICA tax paid by employees was reduced from 6.20% to 4.20% up to the annual wage base of $113,700. Similarly, the rate for self employed individuals was reduced from 12.40% to 10.40%. In 2013, that is now gone, and the employee’s portion of the payroll tax goes back up to 6.20%. This change affects everyone, whether you are an entrepreneur or an employee. For example, if you make $100,000 you will pay $2,000 more in taxes.

3. Dividends and long term capital gains are still taxed at a rate of 15% (0% for low income investors). But the rate jumps to 20% for individuals making more than $400,000 or married filing jointly of $450,000.

4. The estate tax exemption stays at $5 million (indexed to inflation). It does NOT drop back to $1 million. The estate tax rate goes to 40% from 35%.

Disclaimer: Consult your tax professional for more information pertaining to your taxes and specific financial situation.

Planning your finances doesn’t have to come down to the last hour. Be proactive. Don’t kick the can down the road. Plan and create your financial future. After all, it’s your money.

Justin Krane is a Certified Financial Planner with Krane Financial Solutions. Follow Justin on Twitter @justinkrane.

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Guest Post: Could MBAs Be Your Business’ Secret Weapons?

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When a small business owner looks at hiring a new manager, the hiring cost can seem discouraging when the prospective employee has an MBA. There is a strong assumption that MBA students are trained too generally and that they lack decision making skills from a lack of real world experience. Can they be trusted when left unattended with helping to run your business? These are undeserved and unfounded assumptions as MBAs bring real value to small businesses.

The EMBA Advantage

If you’re willing to hire from within your company, you can pay for your employees’ MBA program.
EMBA programs allow your employee to work while attending school. The most apparent downside to this is that you may end up paying for their training and there is no guarantee that they will stick around after graduating. If you create a “golden handcuffs” arrangement, by requiring the employee to sign an employment agreement that stipulates that he must complete a certain number of years of service to the company after attaining his MBA; you’ll be guaranteed an employee with improved performance and existing experience in your industry. An incentive could be tied into this agreement, such as a profit share for example. The advantages of training an existing employee as opposed to a new employee are that you will have had time to establish trust and procedures. By using proper judgment when deciding on sending your employee for training, you could end up with a loyal worker that becomes core to your operations long term

Better Communication

A popular connotation is that MBA graduates have a lot of “book smarts,” but lack any real-world experience and communication skills. Contrary to this belief, many MBA programs now include extensive training in interpersonal skills. Better communication reduces mistakes and improves employee morale overall, making your workforce more productive. Good communicators have to be able to convey ideas effectively as well as have excellent listening skills under their belt.

Good Strategic Planning Skills

MBA programs often emphasize the lifelong learning process as part of this process involves training the employee to think long-term. MBA grads bring to small businesses exceptional problem solving and strategic planning skills. Rather than being focused on a single aspect of the business, MBA grads often possess varied skill sets in the fields of marketing, sales, accounting and loss prevention. Many small businesses that have grown organically do not typically have someone that is trained in all these areas.

Experience and Practical Training

MBA programs force students to address real-life business problems and require them to work through multiple case studies. Regardless of whether you hire from within or externally, you’re getting an employee that already has experience in solving complex business problems. For example, small business owners often face a cash flow problem at some point. You might have unpaid invoices that need to be collected upon before you can make payroll or expand your operations. What should you do? An MBA would help in navigating through your options, including whether to factor those invoices, obtain a short-term loan, or tap into the company’s other equity to pay for necessary expenses.

Another bonus is that MBA students are also well versed with the online networking sites like LinkedIn. What does this mean for your business? Your MBA graduate could already have established relationships with established employees in other businesses that have advanced their training. These friendly relationships could be fostered into working relationships much easier than cold calling for new business.

Therefore your new manager could possess the negotiation and networking skills necessary to cut you a deal that you otherwise might not get. Sometimes in business, it’s not what you know but rather who you know. In this sense, you’re getting more than just a manager. You’re getting access to a network that could significantly improve your company’s bottom line.

Author Bio:
Guest post contributed by Sarah Rawson. She is a freelance writer and is currently studying for an Executive MBA Degree. Her articles appear on various higher education blogs.

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Guest Post: Can Interns Really Boost Your Business?

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Finding the perfect employee for your small business can leave you caught between the proverbial rock and a hard place. You want to hire a candidate who is enthusiastic and a good fit for the position and prepared to work hard. But your budget may not allow you to pay them more beyond hourly wage or provide the full set of full time hours that they want.

Meanwhile, your current staff can’t cope with the extra work, and having an extra pair of hands would be more than welcome. So what is the solution?

Increasing numbers of businesses all over the world are turning to young interns to boost their businesses productivity. In terms of hiring temporary or short term employees, there really is no better solution.

The Ins – Benefits of Hiring an Intern

Often fresh out of college or still an undergrad student, interns are an invaluable asset to any company. Armed with a fresh set of skills, a passion for learning, and a desire to get ahead in their careers, your business really couldn’t find a more perfect employee. But what are the real benefits to your business? How can these young professionals really boost your productivity?

Fresh Ideas

Many people seeking out internships are university graduates or undergrads still studying within their majors. They’re ready to start putting what they’re learned into practice – after years of exams, assignments, and studying; it’s time to take their first steps into their chosen career.

Because of this, they can really bring something new to the table. Interns come with fresh ideas and methods of working, many of which your current workforce would never think of. They can see your products and practices in a whole new light. They can see whole new ways to improve your productivity, sales and revenue – and ultimately, your entire business.

Keen to Learn

Interns are willing and excited to explore new techniques and try different things on the job. They are also eager to impress, as they are looking to make their mark on your business. This means they will be ready to work hard for you.

Give them an appropriate amount of work within the position, instead of having them go for tea and coffee runs. Treat them with the same amount of respect you would with a full time staff member and they’ll do the same to you with the same amount of courtesy and appreciation.

Ready-Trained Employee

When a full time, paid position becomes available, your intern is ready and trained to take on the job. This saves you money on the recruitment process. Why would you re-train someone else, when you have an employee ready and waiting to take on the position?

If you cannot provide your intern a job once their internship is over, you can still lend a hand in helping them find a job elsewhere. Be sure to offer letters of recommendation, and act as a professional reference for your intern. You should also use your contacts to try and help them find a paid position that suits them – either as an intern or employee.

The Outs – The Hidden Pitfalls

Like all aspects of recruitment though, it is important to assess the cons of hiring an intern for your company. Is the process too good to be true? Are there any factors to be aware of before starting up the internship?

Recruiting is Still Involved

If you want to hire an intern, you do still have to go through the recruitment process and luckily social media is making this process faster and more affordable. Candidates are increasingly using social media to aid the job hunt. On Twitter for example, students can search hashtags such as #PRjobs to help hunt around for vacancies. With professional networking platforms like LinkedIn letting them apply for jobs on the site, you can place advertisements at no cost.

Payment Problems

Paying interns is a real issue because not every business has the budget established in place for it. You should always try to offer some sort of compensation – even if it is just a small stipend. Sometimes this can be too much for small businesses and their budgets. If candidates are still at college, you could also try offering telecommuting options. This would allow them to work from home and save on commuting expenses.

Interning is mutually beneficial, when it works well. The benefits of hiring interns far outweigh any potential pitfalls. If your business is looking for a boost, you should definitely begin your hunt for the perfect intern today!

This guest post has been supplied by executive search and selection specialists Outcomes UK. They strive to help businesses of any size employ the right staff for them. To find out more about how interns , interim managers, and temporary employees can boost your business visit them online: http://www.outcomesuk.com.

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6 Facets of Employee Safety Every Office Should Consider

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If you haven’t given your company’s safety policies some careful thought lately, you are making a big mistake. Failure to adhere to prevailing workplace safety guidelines subjects you to legal liability that can cause you to incur fines and leaves your employees at risk for accidents and injuries.

Creating and maintaining a workplace safety plan not only helps to protect a business from lawsuits, it fosters an environment where employees feel valued, knowing that their best interest is being looked after. In assessing your workplace safety plan, think carefully about steps to help prevent accidents as well as procedures to deal with an incident after it occurs.

Items to Prevent Accidents and Injuries

Safety Gear. Employers should require employees to dress appropriately based on their job responsibilities. While office workers may not need a strict dress code, employees who work in dangerous environments need specific Personal Protective Equipment (PPE). For those employees, companies should make available adequate safety gear, such as safety goggles, face shields, hard hats, and protective gloves. In addition, if air quality issues are a concern, employees must have access to respirators. In noisy workplaces, companies should also have earplugs available to prevent hearing damage.

Cleaning Products. Promoting cleanliness yields safety and wellness benefits. Keeping your office or facility in a clean, sanitary condition will contribute to the prevention of illness, which is important to a healthy, productive staff. In addition, eliminating clutter around the workplace prevents slips, trips, and falls, particularly around doors; and poorly light areas. All exits should also remain unobstructed at all times.

Signs. Employers should display posters and signs throughout the office to communicate important safety information. Any dangerous areas of the facility must contain warnings to notify employees about the specific hazards. Also, those employers subject to regulations promulgated by the Occupational Safety Health Administration, or OSHA, must post certain notices for employees, including marking places at a worksite where caution should be exercised, perhaps near an overhang where workers could potentially fall. Some states have policies that are more restrictive than OSHA’s, so familiarizing yourself with state and local laws is important. If all your employees do not speak English, OSHA offers some of its materials in a variety of different languages.

Items to Use in Reacting to an Accident or Injury

Fire Materials. Local laws in most jurisdictions require companies to have portable fire extinguishers, and many buildings have sprinklers, fire alarms, and smoke detectors. Although alarms are great to alert employees of an emergency, if your workplace is noisy or if any member of the staff is hearing impaired, those alarms should also have flashing lights included for maximum safety.

Proper Lighting. If the power goes out as a result of weather or some other emergency, an alternative power source should be available to provide ample illumination for exits. Although an automatic standby generator costs more than a gas model, they turn on automatically in case of an emergency power failure. Also, opt for flashlights (instead of candles, which could be a workplace hazard themselves) to be kept on hand for use in the event of a power outage.

First Aid Kits. First aid kits are great resources for minor scrapes or burns, and they can also provide lifesaving temporary treatment while waiting for EMS if a major injury occurs. Companies should ensure that an adequate number of first aid kits are available based on the number of employees and the layout of the workplace. For example, no one should have to travel down numerous flights of stairs just to get access to medical supplies. Employers must also routinely replenish the contents of their first aid kits and inspect medications to make sure they have not expired.

A safe workplace starts with your employees’ mindsets. Having the right equipment and information on hand creates an environment where it’s obvious that each worker’s individual well-being is valued.

At Safety Services Company the team run by Jay Acker makes materials for conducting weekly safety meetings, safety training programs, posters and other items.

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Three Awesome Perks from Big Time CEO's

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What is the coolest thing your manager or CEO has ever given you? A free lunch? The chance to work at home? Free samples of whatever your company produces?

Whatever it is, it probably pales in comparison to some of the things big name CEO’s are handing out to their employees these days. Of course we could have found a lot more than three examples of CEO’s being generous – there are plenty of stories out there about bosses divvying up their holiday bonuses, or taking a pay cut to help out with things get tough. But these were the three that had our social media department buzzing, and we thought’d it would be pretty cool to look at the perks being given out in the corporate world.

1. Yahoo’s Marissa Mayer Doles Out the Smart Phones
Did you watch the unveiling of the new iPhone 5? Pretty neat, right? Well, if you work for Yahoo, CEO Marissa Mayer will buy you one, and pay for all of your bills. Starting Saturday, Yahoo is finally leaving the old Blackberry devices behind for greener pastures, and the phone that is probably going to replace most of them will be the iPhone 5. Of course, if you’re not the biggest fan of Apple or simply like a different platform, you can choose a phone that runs off of Windows or Android. The idea is that since very few of Yahoo’s users still have Blackberries, this will better tune the Yahoo team into the needs and wants of the user, and help Yahoo bump up the numbers generated by mobile users. Between this and bringing free food to the URLs Cafe, Mayer continues to keep winning our social media team over time and time again!

2. Mojang’s Markus ‘Notch’ Persson Shares the Wealth
Game company Mojang shocked and thrilled the independent gaming community when it released the highly-popular game Minecraft. Few would have guessed that this humble sandbox offering with no real story released and 8-bit art would go on to see over seven million sales across multiple platforms. Back in 2011, Notch was entitled to $3 Million in dividends thanks to the immense success of Minecraft. And, being the generous guy he is, Notch took the money and split it between Mojang’s cozy 25 person team. After taxes it was reported that employees were finishing out the year with around a $90k bonus. Not a bad way to greet 2012.

3. Steve Jobs Leaves Behind a Sushi Chef
Steve Jobs was a big fan of sushi, and one of his favorite spots to eat lunch was Kaygetsu out in Menlo Park. He often brought friends, family, and staff out to the restaurant, apparently booking the entire place for Apple board meetings. When owner and chef Toshi Sakuma decided to sell the restaurant, feeling it required too much attention, Jobs approached him and offered him a job at Apple. Toshi accepted, with the condition that he would have to sell the restaurant first. And he did – his last day of business was on the same day as Jobs’ funeral. As of November Toshi has worked in Cupertino, serving up Steve’s favorite dishes to Apple employees.

CEO’s impact the lives of their employees in a variety of ways, and most of the time offices are just happy to see the company kitchen stocked up. Deborah Sweeney, our CEO, gets us bagels every Friday – it may not be a free iPhone 5, but we’re certainly thrilled to see that bag from the bagel shop with the multiple cream cheese options at the end of the week. So don’t let these kind of lists make you think that anyone will begrudge you for not investing in a sushi chef. After all, one of the best gifts a CEO can give their employees is a happy, healthy working environment – free phones are just cherries on top of the sundae.

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Guest Post: 3 Motivational Training Tips For New Hires

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Training new employees should never be the rudimentary process consisting of a used manual, a few words of encouragement and a “here ya go” send off. Whether your business has 10 employees or is a 1,000+ strong, the training methods should be oriented in a way that excites and enlightens, while being streamlined all the same.

Skills should be seasoned; regardless of how well-qualified a candidate is from the onset. And there are many ways to make the introductory training programs adaptable and accessible for each and every employee.

Here are a few tips towards achieving not just a well-trained employee, but gaining better perspective on your company’s productivity for the long run.

Rule # 1: Have Them Walk Through the Office

Before any training begins, a company should have a structured walkthrough of the entire office, introducing new employees to their new workspace, showing them their way around and introducing them to the rest of the staff before any training protocol is put in place. A welcoming environment goes a long way in putting new hires at ease and getting them excited to work at the new workplace.

Rule # 2: Make Training Videos That Are Easily Digestible

Hitting each and every note with video recordings is important, but making each more wholesome and easily accessible is just as crucial. Here’s a breakdown of that:

  • Make Concise Videos: If you’re focusing your entire training protocol around a set of videos, you want to cover all the bases of your operation, from workplace compliance to specific how-to’s on software or other applications the employee will be relying upon. At the same time, you don’t want run-of-the mill, long-winded videos that’ll hit the snooze button on your employees. Put a modern spin on your videos by making them short, catchy, and quick watches that you can upload to YouTube to rewatch later if they need to review a portion of the segment again.
  • Incorporate Familiar Faces: While this may sound dumb at first, having familiar managers or trainers in the actual videos will put a face to the message much more so than some grainy, overused video that has some monotone actor mumbling about safety at the office. Not to say the employees won’t listen (because they should regardless), it’s just that better content promotes better attention spans.
  • Create Mobile Platforms: Now that you’ve begun the beginning stages of creating training videos on each topic, you should consider throwing mobile applications of the same ilk in the mix. Because by having shorter snippets of training applications at the touch of a smartphone or tablet, your employees, whether their full-time travelers or cubicle aficionados, will be able to review each session for whatever reason.

Rule # 3: Access At All Times

Issuing gigantic binders with 200+ pages worth of content isn’t as effective as having a server specific to training videos for every employee to gain access to whenever they need a refresher. The business should be about having as perfect a structure in place as possible, and aside from having the right HR staff, managers and departments in place, the software and the hardware it’s run on should be just as streamlined and ready to view at the drop of a hat.

Productivity is the name of the game with training. Employees should feel encouraged at the office and sometimes the best motivation is training that’s both proper and continuous. Along with a warm, inviting environment from which to work, adapting your employees to each and every toolset out there can prepare your business for success.

Author Bio: Kyle O’Brien is an avid writer covering a vast amount of topics relative to the business world from productivity tips to learning the market and has consulted for ej4, a company that produces custom e-learning videos aimed at performance improvement for the office and beyond.

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Is Your Office Harboring a 'Michael Phelps'?

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Poor Michael Phelps – after a dismal fourth place showing at the Men’s 400 M race in the London 2012 Olympics, everyone is talking about the new golden boy, American Ryan Lochte, and wondering how Phelps will make up ground from his abysmal fourth place finish. Phelps’ performance in the water has been the focus of most Olympic coverage since Saturday. He may have shrugged off his loss by just calling it ‘a crappy race,’ but it was probably a little bit more than that considering Phelps only started training again six months ago, and commentators have been talking about his poor performance during the qualifiers. So, since everyone else is talking about it, we figured that we could shoehorn the topic into our own blog by helping our readers figure out if they have a ‘Michael Phelps’ situation in their own office.

He is holding onto that medal like it is the only real thing left in his life.

1. Is there an employee that is way too overconfident?
Maybe a few months back they were the office’s star employee. They had all of their reports done early, they got along well with others, and they won the hearts and minds of everyone watching. They could do no wrong. Then, after a some time had passed, they began to slack off a bit. No big deal – they were doing more than their share of work before, and now they’re just settling into everyone else’s level. Then they started to do less, started to show up late or expect others to pick up their slack. And yet, despite all of this, they were genuinely surprised when the rumors about their lackluster performance finally hits their ears.

Overconfidence can hit anyone without warning. Office environments don’t lend themselves well to a lot of negative feedback, lest they become mired in low morale. It’s difficult to judge our performance when no one is willing to tell us our performance is slipping. But if you have a co-worker or employee who is beginning to get a little sluggish, try to nip it in the bud. That doesn’t mean making a big, dramatic scene by calling them into the office and going over numbers from three years back, but a quick chat about getting things where they need to be is a great way to make sure that they don’t flounder and choke when things get hectic.

2. Can they stand not being the best?
There are plenty of people out there who get very upset when they aren’t seen as the best at what they do. These types of people also end up grating on their co-worker’s nerves, and sometimes those co-workers feel a little schadenfreude when that top dog falls from grace. All of this leads to a fairly negative working environment, so if an employee is beginning to see their numbers drop or managers ignore their ideas they need to honestly ask themselves if they can handle a scenario wherein they aren’t the best at what they do. Unfortunately, these types of questions can cause them to turn inwards, and its important to remind them that, even if they’re not the best, they are still pretty dang good.

3. Do they want to become better?
There is always some innate, competitive drive that inspires us to push ourselves to the brink. Offices, especially offices that sell something, feed into that competition. And that is perfectly fine! Sometimes we need something to inject a little excitement into our day. But eventually that competitive drive burns out, especially when an employee thinks they are the best and there is no one who could challenge that position. Then when that self-understanding is inevitably challenged, the person who was once on top feels that it would be impossible to ever reach that position again. So they shut down, and just do the bare minimum.

And that isn’t a healthy mentality to have. So if there is an employee on the floor who is barely being noticed after months of being on top, talk to them. This type of situation can be very depressing, and sometimes we need to be reminded that its just work, or a hobby, or a sport.

That, sometimes, we just have ‘a crappy race.’ Phelps still has 5 races to compete in (one of them tonight!), and we’ll all be waiting to see if he can bring back some of the magic he showed in the water at Beijing. There is no reason that an ex-golden employee could not do the same.

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Guest Post: How to Improve Your Cold Calling Results

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Your company may be one where routine cold calls contribute to your business and keep new customers coming in. But when it comes to cold calls, your staff probably hears more “no” responses than “yes” when you’d like it to be the reverse. Whether you have an outbound call center or a single employee who focuses on cold calls, these tips can help improve your results.

Before You Start

If your company is one that turns to cold calls, chances are you have at least one person focused on doing just that. The process can easily become tedious for the employee calling out and this can hinder their interactions with other potential customers. Before you even make a call, here are some things to keep in mind.

  • Throw out your script, or at least create one that is easily customizable. Every new person you call is different than the last, so why should the script stay the same? You want to create a relationship and a script can make doing so more difficult.
  • If you can, do a little digging into the business and person you plan to speak with. Saying something different from what you’re pitching is a great way to establish rapport before you transition to the reason for your call. It also provides insight into how you should pitch.
  • Be prepared to leave a voicemail. Be brief, pitch-free, and leave a contact number to be reached at (and repeat it back a second time) and your chances of a return call increase.

Continue reading →

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How to Manage When Your Manager is on Vacation

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The boss is away, so should the employees play? Of course not – managers deserve time off without having to worry about the office falling to ruins without them. Most people would agree, but there is still the issue about the best way to handle the boss being out of the office. Are there extra responsibilities that need to be taken up? Should anything in the office change, or should day-to-day life continue unhindered? Since our own boss is currently partying it up with Mickey Mouse on the Disney Cruise Line, the Social Media department figured that others could benefit from our sage advice on how we deal with the managerial absence in the office.

  1. Keep a log of what you’ve done

    2. Now this doesn’t mean you have to write down every, single little detail of what you’ve finished while your boss was gone, but you should at least keep a broad log of what you’ve finished so that everyone can stay in the loop. We typically have a meeting with our boss every week so this little log is expected, but even if you don’t meet with them it’s still a good idea to have something on hand that you can turn over if somebody comes by your desk for an update on what you’ve been up to.

  2. If you’re trusted, act trustworthy

    3. Our office operates in a very healthy atmosphere of trust. The employees trust the managers, the managers trust the employees, and everyone gets along. The bigger the office gets, the more important trust becomes. Office morale can be killed overnight by a nosy employee or an irresponsible manager. You should never do anything that you’d be embarrassed of if you were caught. Plus, the last thing you want is for your boss to come back and think that they suddenly need to micromanage everyone.

  3. Don’t be afraid to send them a quick e-mail to see how things are going!

    4. Now this may not fly in every office, but MyCorp’s workforce is fairly close and we chat with our CEO all the time. More than anything, checking in is just a nice gesture. Our Social Media manager Heather sent out a little ‘Bon Voyage’ e-mail that has led to a few good back-and-forths between her and our CEO. If you don’t feel it’s appropriate then feel free to ignore this piece of advice, but if you have a close knit office then it’s not a bad idea to check in and ask how the vacation is going.

In all likelihood, your office isn’t going to change very much when your boss heads out for a couple of days. But it is always a little weird to have the person you report to and work for head out the door – it’s certainly odd to not have Deborah walking through our office. Just have a little common sense, and write down whatever you think your boss will want to know when they come back. That way they’ll be relaxed, updated, and happy – plus they’ll know they can loosen the reigns a bit without having to worry about things falling apart.

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5 Things Employers Should Consider When Offering a 401k

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Starting this July, 401k participants will receive more disclosures about the fees they are paying inside their 401k plans.

The Department of Labor wants more transparency and disclosure on what kind of fees employees are paying inside their 401k plans. Why? Because many employees have no idea how much they are paying in mutual fund fees. A recent survey by AARP said that 71% of people saving for retirement thought they didn’t pay any investment fees whatsoever.

The fees inside a 401k are either paid by the plan sponsor (you – the employer) or by the participants, which are the employees. Over the last few years more of the fees have been paid by the employees. According to a report issued by the Investment Company Institute and Deloitte, employers are moving more of the plan charges onto their employees. For instance, employees are now paying for 91% of plan expenses, which is a substantial increase from 2009 when they paid 78% of such charges.

So how does this happen? Say an employer wants to start a 401k and calls a bunch of mutual fund families to get some pricing quotes to see how much it will cost to set up and administer. Most of the bids come back at $5000 a year. But one comes back at $1000 a year. Why is this one so much cheaper? Because the fund is making the money on the back end – higher mutual fund fees. So the employer goes with the cheaper option, and the little guy ends up paying more in fees.

A report issued last month by the U.S. Government Accountability Office highlighted that many employers aren’t really aware about the fees charged by retirement plan providers (the mutual funds). The most obvious known fee is the expense ratio inside the mutual funds offered inside the 401k plans. Many 401k plans do not offer enough low cost mutual funds such as index funds. That’s because they are usually not as profitable (to the fund company) as an actively managed fund is.

Not sure what the difference between an index fund and actively managed fund is? Further explanation along with the five things to consider if you offer your employees a 401k program and what it means for them are below.

1) Offer index funds inside your 401k plan (for an explanation of index funds vs. actively managed funds, click here)

2) Be proactive. Tell your employees about the upcoming information they will receive about the fees they are paying.

3) Calculate the average expense ratios of the funds in your 401k.  Shop your pan and see how competitive your current 401k is.

4) Remember that if you are most likely a plan fiduciary, which means you are personally liable if you breach your duty as a fiduciary to the plan participants and beneficiaries.

5) Consult with 3rd party professionals like plan administrators and ERISA attorneys to make sure your 401k plan is compliant.

Some Additional Statistics to Keep in Mind…

In the 1990s, when the average stock mutual fund was making 10% year after year, no one was complaining about mutual fund expenses inside 401k plans.  Everyone was making money.  But today, stock market returns have averaged 3.77% for the past 10 years.  Mutual fund fees inside 401ks have decreased over the past 10 years.  According to the Investment Company Institute, the average expense ratio for a stock fund in 1997 was 1.04%.  In 2011, the average fee was 0.93%.

Remember: higher fees mean lower returns for 401k participants.

If the average investor made 3.77% net of fees and the average fee paid by the investor was 0.94%, the average investor paid nearly 20% of his/her profits in fees.

The trend is for more transparency in 401k fees that people will pay.  Get in front of this and be proactive.  Remember what Wayne Gretsky said – “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.”

Justin Krane is a Certified Financial Planner with Krane Financial Solutions. Follow Justin on Twitter @justinkrane.

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