A 401(k) plan is a popular retirement savings plan employers can offer their employees. Employees contribute part of their salary to a tax-advantage account, which is invested in various assets. Employers can match a portion of employee contributions, making 401(k) plans an attractive benefit for workers.
What are the Types of 401(k)s?
Traditional 401(k) Plans: These are the most common 401(k) plans. Employees contribute pre-tax dollars, reducing their taxable income. Employers match a portion of the contributions.
Safe Harbor 401(k) Plans: Safe harbor plans pass specific IRS nondiscrimination tests automatically. Employers must make contributions on behalf of employees as a match or a non-elective contribution.
SIMPLE 401(k) Plans: These are appropriate for small businesses. Employees can contribute a portion of their salary, and employers must match or make a fixed non-elective contribution.
How Does the Company Benefit from Offering a 401(k)?
Employers can benefit from offering a 401(k) plan in several ways:
Employee Retention and Satisfaction: Offering a 401(k) can help to reduce employee turnover. Employees tend to be more satisfied and stay with a company that helps them invest in their future.
Meeting State Mandates: California requires employers with five or more employees to offer a retirement plan or register with the state-sponsored CalSavers program by a specific date. The most recent deadline is December 31, 2025.
Tax Advantages: Employer contributions are tax-deductible, and the plan assets increase tax-free. This can result in tax savings for the business.
Attracting Talent: A competitive benefits package, including a 401(k) plan, can be a major influencer for candidates considering job offers.
Financial Wellness: Employers can create productivity by contributing to employees’ 401(k)s, as employees feel more secure about their financial future.
These benefits foster a productive work environment and a stronger, more competitive business.
Key Considerations for Employers
Plan Design: Employers must choose a design that aligns with their business goals and employee needs. Factors to consider include contribution limits, vesting schedules, and eligibility criteria.
Investment Options: Employers should offer diverse investment options for the 401(k) plan. Employees can choose from various funds, including stocks, bonds, and target-date funds.
Fee Transparency: Employers should select a 401(k) provider that offers fee transparency. Employees should know exactly what fees they pay for admin and investment management.
Integration with Payroll: Consider providers that integrate 401(k) administration with payroll services. This streamlines processes, reducing errors and saving time.
In closing, Employer 401(k) services help employees save for retirement. Employers can support their workforce’s financial security by offering a well-designed plan with transparent fees and investment options. With over 50 years of expertise, Employee Retention Benefits has the expertise to guide you through setting up a 401(k). Contact us to learn more about taking your business to the top.
