The Advantages of Establishing a 401(k) Plan
There are many important benefits as an employer for establishing a 401(k) plan, including lower cost and tax savings, employee appreciation, and employee attraction and retention. Also, there are tax and non-tax benefits for the employees.
Some of the key benefits as an employer include lower cost and tax savings, employee appreciation, and employee attraction and retention. Also, there are Tax and non-tax benefits. As part of the tax benefits, 401(k) plans can be less costly to fund compared to other retirement plans. As part of the non-tax benefits, employees view an employer-sponsored retirement plan as part of an overall benefits package, thus attracting high-quality employees
Advantages of Establishing a 401(k) Plan
- Up to a $5000 Tax Credit!
- Current tax deduction for business owner
- Shelter earnings from tax
- Grow assets through the power of tax deferral
- Retain key employees
- Help employees save for retirement
- Enhance employee security and morale.
- increase employee incentive and productivity, which, in turn, increases company profitability.
Benefits for Your Employees
As with Employer benefits, employees receive tax and non-tax benefits. For Employee tax benefits, contributions and earnings are generally tax-deferred until distributed from the plan. Employee elective deferrals may be made on a pretax basis. In simpler terms, this gives immediate tax savings to participants. Also, if the employer offers a qualified Roth contribution, employees who make designated Roth contributions may be eligible to distribute those assets tax-free and penalty-free. Some of the non-tax benefits for employees include the opportunity to participate in a 401(k) plan which will help the employees prepare for financial security in retirement.
Advantages of Participating in a 401(k) Plan
- Save for retirement
- Grow assets through the power of tax deferral
- Reduce taxes through deductions
- Asset and creditor protection
