401k Plans

A 401(k) is an employer sponsored retirement plan designed to provide tax advantages on an employee's retirement savings. 401(k) plans must be sponsored by an employer who acts as a fiduciary for the account. The employer, which is usually a corporation, is responsible for the establishment of the plan and for the selection of plan investments. Once the plan has been established, the employee defers a portion of his/her annual salary into the fund.

In a participant-directed plan the employee selects from several investment options. In a trustee-directed 401(k) the employer appoints trustees who in turn determine the plan's investment strategy. The first 401(k) plan, which was established in 1980, was named after a section of the Internal Revenue Code.

Your Existing or New Company 401(k) Plan & G.W. Sherwold Associates, Inc.:

Historically, the company 401(k) plan has been an excellent vehicle to encourage tax-deferred saving and promote employee retention. Unfortunately, most company 401(k) plans offered today are plagued with high fees, and little to no consistency of investment returns. Often, insurance companies and large brokerage firms that offer these 401(k) products treat their affiliation as a means to market their firm’s own investment funds. This agenda commonly restricts the quality of the company plan to a level far below that desired by the company for its employees.

G.W. Sherwold Associates, Inc. is a Registered Investment Advisor, and a member broker/dealer of Financial Industry Regulatory Authority (FINRA). For over thirty years we have designed and advised companies to assure their employee retirement plans create the maximum value for participants, at the lowest cost to the company.

Consistency is Key:

Consistency plays a key role in the benefit an employee receives from a company retirement plan. By eliminating the majority of the investment volatility, employees can benefit from compounding investment returns over many years, and are much less likely to panic and make ill-advised emotional mistakes in weak economic periods. In our experience, employees are also much happier and actively participate to a greater extent when the plan is designed to control volatility and promote consistency of investment return.

Lower Cost Through Higher Quality Institutional Investments:

The investment options within the employee retirement plans we design have expenses that typically are only a fraction of the fees charged by the largest 401(k) plan providers. Our institutional investment choices have expenses ranging from .15 to .65 per year; whereas the largest 401(k) plan providers fund expenses can approach 2% per year. Very large retirement plans, like the California Public Employees Retirement System (CALPERS), utilize these high-quality low-cost investment options, but smaller plans often opt for very expensive, poor quality turnkey products.

Employees Benefit and the Potential of Corporate Liability Related to the Company Retirement Plan is Eliminated Through the Registered Investment Advisor Relationship: 

Employees want and need on-going advice to maximize their benefit from the company retirement plan. If a registered advisor is not available to the plan, these employees will often seek the advice of a co-worker or an employee in the employee benefits department. As a fiduciary to the plan, we are always available to advise participants on plan related matters. 

Please read on for further information regarding 401(k) plans:

Employee Retirement Income Security Act (ERISA):

401(k)’s are tax-qualified plans covered by the Employee Retirement Income Security Act of 1974 (ERISA). This act stipulates that 401(k) assets are protected from creditors. Other types of defined contribution retirement plans include 403(b) plans, which cover workers in non-profit organizations, and 457 plans, which cover local and state government employees.


 Elective deferral contribution limits for 401(k) plans increased to $18,000 per year in 2015, up from a limit of $17,500 in 2014. The current law governing 401(k) plans--the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) provides for increases in the annual limit to match cost-of-living increases.

Taxes and Distributions:

Taxes on 401(k) plan contributions and earnings are deferred until the plan owner takes a distribution from the plan. When money is withdrawn it is taxed as regular income. Withdrawals are typically made at or after the plan owner has reached the age 59 1/2. If the plan owner withdraws money from the account prior to retirement age, then he/she will incur a 10% penalty payable to the IRS (unless specific circumstances apply).


Many plans also allow employees to take loans from their 401(k) plans. When these loans are repaid, the funds then become part of the 401(k) balance.

Contact Us

22994 El Toro Road
Lake Forest, CA 92630
Phone: (949) 470-0700
Toll Free: (800) SHERWOLD
Fax: (949) 470-0707
Email: invest@gwsherwold.com    


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