Starting an employer-sponsored 401(k) plan for your business
Businesses have many options for retirement plans, but the most popular plans are 401(k) plans. A defined contribution plan, like a 401(k), does not promise a specific amount of benefit at retirement. In these plans, employees or their employer (or both) contribute to employee’s individual accounts under the plan, sometimes at a set rate such as 5 percent of salary annually or with a specific match for an employee contribution. 401(k) plans have become a widely accepted savings vehicle for small businesses.
A 401(k) plan allows employees to contribute a portion of their own incomes toward their retirement. The employee contributions reduce a participant’s pay before income taxes, so that pre-tax dollars are invested. 401(k)plans offer higher contribution limits than SIMPLE plans and IRAs, allowing employees to accumulate greater savings.
If you do decide that you want to offer a retirement plan to your employees, you are definitely going to need some professional advice and guidance. Pension rules are complex, and the tax aspects of retirement plans can also be confusing. At CLF Asset Management, we are versed in the specific rules related to starting a retirement plan and we can help you determine if a 401(k) plan is right for you and your employees.