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.
![](/wp-content/uploads/2020/03/2.png)
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