Small business owners have several options available to them when it comes to choosing a 401(k) plan for their employees. We’re going to discuss why you would want to present your employees with a retirement plan and give you some suggestions on which plan to implement.
Why Offering Employees a 401(k) Plan is Good for Your Business
When you utilize a 401(k) for your employees, you not only give them an excellent way to save for retirement, you also derive financial benefits for your business. Some reasons to start a 401(k) include:
- Attracting and Keeping the Best Employees
People looking for lucrative, stable employment will be attracted to this benefit of your company.
- Tax Deductions for Your Business
When you make contributions to your employees’ accounts, you are entitled to tax deductions.
- Tax Deferrals
Most earnings and contributions aren’t taxed until the money is distributed.
- 401(k) Accounts Go with Employees
When an employee leaves your company, he may be able to take his benefits with him. That means your
duties to him are finished when his employment is over, which helps with accounting.
What to Do First
In order to comply with governmental regulations, you must first do four things to create a 401(k).
- Adopt a written plan document for the plan’s foundation
- Set up a trust fund to maintain all plan assets
- Know how records will be kept and who will keep them
- Give plan information to eligible employees
You may want to consult a professional to help you with your written plan document. Noomii.com is a well-respected resource that offers business coaching advice.
Which 401(k) Plan is Best for Your Small Business
Traditional 401(k) Plan Benefits
This plan offers the most flexibility to you and your employees. You have the choice to make contributions to all participants, match employees’ contributions or both. This type of plan comes with annual testing requirements that make sure each participant’s benefits are appropriate.
Safe Harbor 401(k) Plan Benefits
These types of 401(k)s do not entail annual testing. An employer must make a certain level of contribution instead.
Automatic Enrollment 401(k) Plan
This plan allows automatic employee enrollment, and deductions are put in default investments. This is a good way to increase plan involvement.
Your business can take advantage of any of these plans regardless of its size. If you’re still unsure of which plan to develop or have additional questions, talk to a business coach from a well- known company like noomii.com. Let an experienced professional guide you through confusing business areas to well-thought out solutions.
This article is brought to you by noomii.com which is a company that provides business coaching tips, help, and advice for all business owners operators. You can find a business coach in Atlanta, Toronto, and Denver, along with thousands of other cities in the U.S. and Canada.