Supporting business owners & employees
A 401(k) plan is an important savings opportunity to help employees prepare for their future and one that only an employer can give them. It’s also important to understand the benefits for you and your business by offering a 401(k).
Lowers Taxable Income
- Business owners are eligible to participate in the 401(k) and contribute $19,500 a year, with an extra $6,500 in catch-up contribution for individuals over 50 years of age. That means anybody, including business owners, could be reducing their taxable income by as much as $26,000 per year.
- It’s especially easy for employers to maximize their contributions if they adopt a Safe Harbor 401(k) plan, which involves making a standard contribution to all employees, regardless of how much they contribute to the plan or a matching contribution that meets the safe harbor requirements.
- There are also other plan types, like profit sharing, which allow business owners to save as much as $57,000 per year before taxes—or $63,500 per year with catch-up contributions.
- Plan management expenses qualify as deductible business expenses.
- Many employers make matching contributions to employees’ 401(k) accounts. These contributions may qualify as ordinary business expenses, in which case they are tax deductible up to the annual corporate deduction limit on all employer contributions (25% of covered payroll).
- Profit-sharing contributions to employees’ 401(k) accounts are also deductible, further reducing the tax liability for small businesses.
EMPLOYEE RECRUITMENT AND RETENTION
- Retirement benefits are cited as the second most important perk of employment behind health insurance.
- Offering retirement plans can help in employers’ efforts to attract new employees and reduce turnover. Employees who are investing in their future through retirement plans may be less likely to move on to other companies — in particular, when employers make matching contributions or provide additional value it adds to an employee’s total compensation.
- When you’re working with the IRS and working with tax benefits, things can become stressful, fast. It’s a relief to hand it all off to your 401(k) advisor. As a small business owner, you have enough stress on your plate.
- If you’re like most small business owners, you’re probably working long hours, managing all of your business’s employees, and putting out the fires that always seem to crop up. Why add 401(k) management to your long list of duties?
- Managing a 401(k) plan takes time. There’s paperwork to be completed, choices to be made, contribution management, and employee questions to answer. But you’re running a business. You don’t have time to manage your 401(k) plan on top of it.
- Entrusting a good 401(k) advisor with your 401(k) planning ensures that your employees get their questions answered, paperwork is completed on time, and you’re kept up to date on all decisions that need to be made. All without taking up more of your in-demand time.