Why should a small business owner consider a 401k plan?
401k plans have become a popular in the workplace, valued by employers and rank-and-file employees alike. Benefits include: - Gain an advantage when trying to attract and hang on to high-level employees.
- Employers receive a tax deduction for contributions to their employees’ accounts.
- Allow participants of the 401k to contribute pre-tax dollars to their.
- Money put into 401k accounts grows via investments in stocks, mutual funds, money market funds, savings accounts, target date funds, and other investment vehicles.
- Contributions and earnings generally are not taxed by the Federal government or by most State governments until they are distributed.
- A 401k plan may allow participants to take their benefits with them when they leave the company, easing administrative burdens.
- Participants are able to borrow against retirement savings in times of need.
401k plans have become the most common defined contribution (DC) plan, serving 47 million active participants and holding $2.4 trillion in assets at year-end 2005 (Source: Investment Company Institute, 9/2007).
Employers offering 401k plans face two competing fiscal pressures: the need to attract and retain highly skilled workers in an increasingly competitive environment, and the necessity to keep such offerings competitively priced. As small businesses increase the size of its payroll and its workforce, it also increases costs associated with providing 401k products and services. A 401k plan sponsor (the employer) and the plan participants (employees) share the costs associated with a 401k plan, but it is critical to understand all costs associated with the plan and have an open dialogue with the plan’s provider.
Snap401k makes all costs and fees associated with our plans transparent to our clients, and keep costs to a minimum.
You can learn more about our costs and 401k fees here.
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