There are a variety of benefits that you can offer to the employees of your small business. One benefit that will be attractive to current and future employees is a 401k plan. A 401k plan will allow your employees to invest money on a pretax basis and take advantage of the increased growth that can occur from their investment. In addition, there are several benefits that you as the business owner will receive by offering a 401k plan.
- Offering a 401k plan can give you an edge in recruiting new employees.
Savvy potential employees know that there is more to an offer of employment than the salary. The benefit package you offer could make the difference between a potential hire accepting your offer instead of a competing offer. A 401k plan allows employees to invest money from their salary on a pretax basis. Employers can offer to match employee contributions, which makes the 401k plan even more attractive. The tax savings and employer match offered through a 401k plan can set your company apart from other job opportunities the potential employee may consider.
- Offering a 401k plan is a way for you to encourage the people you employ to save for the future.
When you own a small business, your employees can quickly become like family. They will benefit in the long run from saving for retirement. In addition, they will enjoy the tax benefits that come with saving for retirement on a pretax basis. Another way to encourage participation in the 401k program is to match employee contributions up to a certain percentage. As the employer, you will receive a tax deduction for the match you contribute to the employee 401k program.
- You can set up and maintain a 401k plan on your own or hire outside help.
Setting up a 401k plan for your business does not have to be a complicated task. There are multiple types of 401k plans and the first step is to choose the plan you want to offer to your employees. The types of plans you can offer to your employees include a traditional 401k plan, a safe harbor 401k plan, and an automatic enrollment 401k plan. You can start the process of setting up the plan once you have decided which type to offer. You can establish your own plan or hire a professional to help you with the set-up and management. If you want to establish your own 401k plan, there are a few steps that you need to take to get it started. According to the U.S. Department of Labor you must:
- Adopt a written plan document
- Arrange a trust for the plan’s assets
- Develop a recordkeeping system
- Provide plan information to employees eligible to participate
If you choose to hire a professional to establish and manage your company 401k plan, they will do most of the work for you. You will have to pay for the help but it can be worth the cost because it will free up your time so you can focus on other aspects of your business.