Evaluating a 401(k) Plan for Your Business
Why have a 401(k) or any other type of retirement plan?
- Offering a retirement plan as part of an employee benefit program helps three parties - the business, the owner and the employees.
- The right type of retirement plan can become an integral part of the management of your business. It can help attract, retain and motivate your employees. In an environment where keeping good employees is becoming more difficult, a good retirement plan, and effective communication about the plan, can be powerful tools.
- The right plan, properly structured, can also help the owner of the business build a substantial retirement nest-egg of his own.
- Finally, employees are keenly aware of the need to take control of their future financial security. Providing assistance with a company sponsored retirement plan will help them reach their retirement goals.
What is a 401(k) plan?
A 401(k) plan is a company sponsored retirement plan that allows employees to defer a portion of their wages into investment options of their choice. Employers have the flexibility to make contributions and can offer some form of matching contributions to their employees. The flexibility of employer and employee contribution aspects of 401(k) plans are part of the reason so many companies have chosen this form of retirement plan. And are a couple of the reasons that now over 40 million Americans are choosing to participate in 401(k) plans.
Why consider a 401(k) plan?
If your business has many employees, you wish to provide an attractive employee benefit and a 401(k) plan may be the most attractive alternative. This form of retirement plan can also allow for larger contributions than many other types of plans.