401k companies have become the retirement plan of choice for many companies. Although they offer many advantages for the company and employees, there are several issues that must be considered when evaluating them.
Why should I have a 401k companies plan or other retirement plan?
Offer a retirement plan as part of an employee benefits program it helps three parts: the company, the owner and employees.
The right type of retirement plan can become an integral part of managing your company. It can help attract, retain and motivate their employees. In an environment where keeping good employees is becoming increasingly difficult, a good retirement plan and effective communication about the plan can be powerful tools.
The right plan, properly structured, can also help the business owner to generate significant savings for retirement.
Finally, employees are aware of the need to control your future financial security. Offer help through a retirement plan sponsored by the company will help them achieve their retirement goals.
What is a 401k companies?
A 401 k is a profit sharing plan sponsored by the company that allows employees to allocate a portion of their salaries to investment options you choose. Employers have the flexibility to make contributions and can offer some form of counterpart contributions for employees.
Why should I consider a 401k companies?
If your company has more than a few employees want to offer an interesting benefit to them and simultaneously maintain control over some aspects of retirement plan. In this case, a 401 (k) may be the most attractive alternative. This type of retirement plan allows higher contributions than many other types of plans.
Fundamentals of a 401k companies
All employers with one or more employees may establish a 401 k. Generally, this type of plan can be economically viable when a company has at least 25 employees.
These plans allow employees to contribute pre-tax dollars for their own benefit. Employees about the process for planning their own retirement.
The contribution limits are higher than those of most other types of plans. Employees can defer up to $ 16,500 (in 2010) in his account. The total contribution, including employee contributions and the employer is limited to 25% of the remuneration of up to $ 49,000 (for 2010).
The 2001 tax law also created a provision on “contributions upgrade” to participants over 50. According to this provision, in 2010, an eligible participant can contribute an additional $ 5,500 to his plan.
The employer may attach a schedule award to the contributions of the company. This provides a strong motivation for employees to remain in their company. Employee contributions are allocated immediately.
The company may have some level of control over their contributions. Usually, the plan document provides a certain level of counterpart funding percentages of deferred employee, but may allow the company to make a discretionary contribution, often depending on the financial results.
The 401 k should be available to all employees at least 21 years old and worked at least 1,000 hours during the previous year.
Most 401 (k) offers investment flexibility. Participants choose to invest their money among several alternatives. Usually, there are a number of mutual funds and often an option to buy shares of the company (if the company is listed on the stock exchange).
They must make annual filings with the Internal Revenue Service and special tests to ensure that your plan does not discriminate in favor of highly paid employees.
How to study further 401 (k)
The key parts necessary to establish and manage a 401k are a manager and an investment manager. Many investment managers such as banks, mutual fund 401k companies and some investment advisors offer programs with special packages that include administrative services, as well as its investment management options. There are reporting requirements of the Internal Revenue Service and the Department of Labor to 401 (k) can also be part of their services.