What is a 401(k) Plan?
A 401(k) is a feature of a qualified profit sharing plan that allows employees to contribute a portion of their wages to individual accounts. A Traditional 401k Plan is sponsored by an employer and it lets workers save and invest a portion of their paycheck before taxes are taken out up to IRS prescribed limits. These taxes are not paid until the money is withdrawn from the account at retirement or other distributable events.
What is a Roth 401(k) Plan?
A Roth 401(k) is an increasingly popular option within a 401(k) plan that represents a combination of features of the Roth IRA and a traditional 401(k) plan. In a traditional 401(k), you contribute income pre-tax, and then pay taxes on the funds when you withdraw them during retirement. By offering a Roth 401(k) option, employees can elect to pay the taxes upfront allowing them to make withdrawals tax-free during their retirement. Under the Roth 401(k), employees may contribute funds on a post-tax elective deferral basis, in addition to, or instead of, pre-tax elective deferrals under their traditional 401(k) plans.
Why Offer a 401(k) Plan?
Among many other benefits, providing a retirement plan such as a 401(k) Plan can help you to achieve greater stability within your company. Simaltaneously, it will also help your employees meet their long-term financial goals for retirement. Studies show that by offering a quality retirement benefit plan, such as a 401(k) Plan, an organization will attract and retain the best talent for your company which will strengthen your business overall. A 401(k) plan can make your company more competitive and show your employees that you care about their financial future. Employees satisfied with their benefits are going to be happier workers.
Invest in Your Own Retirement
You can invest money for your own retirement in the plan you set up for your employees. A retirement plan may have these benefits for you and your employees:
- Potential growth of your investment earnings that’s tax-deferred until you take a withdrawal or distribution
- Reduction of your income tax liability
- Employer contributions are tax deductible to the employer
- As an owner you are also eligible for company matching or nonelective contributions
Safe Harbor 401(k) Plans
Many company owners actively seek to maximize their 401(k) contributions each year. That’s a great goal, but it can be problematic if your plan fails to meet the nondiscrimination rules. Adding a Safe Harbor provision can confidently address this issue while providing important benefits to your company and employees.
In this video, you’ll learn how Safe Harbor contributions work and four benefits of adopting this plan provision. Give us a call if you’d like to learn more about how Safe Harbor contributions can help make your plan more successful.
Choose a Plan That Suits Your Business
There are many types of retirement plans available. A 401(k) plan may be exactly what your business is lacking. Each retirement plan has its own benefits, features, levels of complexity and costs. Some are designed for large companies; others, for smaller enterprises. TPS Group is here to help you choose a plan that is tailored to meet the needs of your business.
There are a lot of components to 401(k) plans that an employer must consider. TPS Group is here to help make those decisions easier by providing you with the expertise and the information you need. Whether you're looking to establish new retirement services, such as a 401(k) Plan in CT, or revise your company’s current plan, TPS Group can walk you through the options. Our process is designed to be easy to understand and implement.