Benefit, Here Are Your Articles for Monday, April 03, 2017
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Evaluating a 401(k) Plan for Your Business


A retirement plan offers a powerful incentive to attract talented employees to your firm. It's typically used by midsized to larger companies, but don't let that discourage you. In fact there are a variety of retirement plan options—401(k) and others—and one may be right for you. You can investigate your choices with Benefit Providers to learn what your alternatives are.

If you do go with a 401(k) plan, understand how it works: Typically, 401(k) plans are structured so that the employee contributes a percentage of their wages into the investment of their choice. Companies may match a portion of that percent to encourage saving.

Employees like 401(k) plans for many reasons. First, their contributions can be tax-deferred, so putting pre-tax dollars into the 401(k) plan lowers their overall taxable salary. Secondly, if the company matches a portion of their investment, it's like getting "free" money.  A good matching program encourages retirement savings.

If you're thinking about offering your employees a 401(k) plan and you're still evaluating your options, keep the following facts in mind:

  • Not every plan is right for every business, for either practical or legal reasons. Consult with a professional to find out what is right for you.
  • Employers create a vesting schedule and can craft vesting schedules to encourage employees to remain with their firm over time.
  • The plan documents establish the rules of the 401(k), including contribution levels. These can be fixed or flexible and tied to company profits.
  • Offering participants greater investment flexibility increases a 401(k) plan's appeal to employees.
  • Once a 401(k) plan is in place, you must offer it to all employees who are 21 years old or older and who have worked 1,000 or more hours in the prior year.
  • Employees who are 50 years old or older can add more funds to their 401(k) as part of a "catch up" system.

Is Offering a 401(k) Program a Good Idea for Your Business?

As with any business decision, it's important to evaluate the pros and cons of offering a 401(k) plan—or an alternative—to your employees. They do offer many positive benefits, and may help you recruit employees and retain them in your employ longer. 

However, if your company is very small, it may benefit you to speak to one of our team members about other plans. Indeed, there are great plans out there for companies with only one employee! As you grow, it may be cost effective later to offer a traditional 401(k), and we can help you as you grow.  

Gone are the days when companies offered a gold watch and a pension plan to loyal employees upon their retirement. Today, employees expect to manage their own retirement options.

You can help them achieve their retirement investing goals by offering a 401(k) plan, while simultaneously achieving your own retention and recruitment goals. Retirement plans are among the most popular benefits you can offer. Don't lose in the recruiting game because you don't have one.

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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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