The 401(k) plan may not have a "catchy" name - the term stems from a section of the US Internal Revenue Code - but these tax deferred plans have certainly caught on with the American public. Over 40 million employees are saving for retirement through company-sponsored 401(k) plans.
A 401(k) is one of your company's key employee recruitment and retention tools. These are retirement savings plans that are funded by employees with before-tax salary contributions and, in most cases, by matching contributions from the employer. All contributed funds grow tax-free until withdrawn. Unlike traditional pension or defined benefit plans, 401(k) contributions are voluntary. Guidelines established by The Retirement Income Security Act of 1974 (ERISA), state that funds contributed to 401(k) accounts are not an asset of the employer, but are held in trust on behalf of the employees. This protects plan assets from creditors in the events of employer bankruptcy. Another advantage of a 401(k) is that IRS rules allow participants to "borrow" up to 50% of funds from their 401(k).
401(k) plans help employers :
- Well designed plan helps attract and retain the most desirable employees
- Contributions to employees' accounts are tax deductible
- Help your employees plan for retirement
- Take greater control of your own financial future
401(k) plans help employees :
- Defer federal and most state income taxes
- Contribute to the plan via automatic payroll deductions
- Simplify their investment decisions
- Build security through plan "portability" - employees retain their 401(k) accounts after leaving the company
- Grow retirement savings through employer contributions
Choosing the right retirement plan for your business and administering the plan for your business and administering the plan is complicated, and requires expert consultation and administration. Several retirement plan options exist for small to mid-size companies depending on their needs:
- 401(k)
- SEP IRAs
- Simple IRAs
- Profit Sharing Plans
- Defined Benefit Plans
Our 401(k) Plans are administered by prestigious third-party administrators Rothschild Investment Corporation, CDHM Financial Advisors, Raymond James Finincial and Lincoln Financial Advisors. Our partnerships with these proven professionals will save your HR department time - and your company money by managing contributions and payouts for plan-enrolled participants.
