This Is Why Your Employer Should Offer a 401(k)

Offering a 401(k) has now become standard practice for many businesses, regardless of what size they are. As employees start to realize the many advantages that 401(k) plans have over other types of retirement savings accounts, they are factoring the availability of one through employer benefits when deciding on which job they would like to take. Business owners are realizing this shift in need from employees and have indulged in creating 401(k) plans as they provide many benefits for the business as well. Let’s see what some of these benefits are below. 

Business Tax Savings 

Businesses can experience tax savings from offering 401(k) plans in three different ways. These include the EGTRRA Tax Credit, contributions tax deduction, and reduction of payroll taxes due annually. Let’s take a look at how each one of these tax savings work.

First, we have the EGTRAA tax deduction, which stands for Economic Growth and Tax Relief and Reconciliation Act. This allows small businesses an annual total tax credit of up to $500 for the first three years of instituting a retirement savings plan. The tax credit is equal to 50 percent of the cost of creating and administering a 401(k) savings plan. Only small businesses with less than 100 employees qualify for this tax credit. 

When a business decides to contribute to their employees 401(k) plans, they immediately qualify for a tax deduction. All the contributions that are made throughout the year can be deducted up to applicable limits. Lastly, when employees make contributions to their 401(k) plan, it’s from their before-tax income. This means the salary listed on the payroll sheet for the business will display the amount the employee made after their 401(k) contributions. This could potentially translate to a reduction in payroll taxes due annually.

Employee Recruitment And Retention 

In most situations, employees have many options when it comes to finding a job they want. This has led more employers to come up with great benefits to successfully recruit experienced staff. Having an established 401(k) retirement savings plan is a must for any business that wants to recruit and retain productive and knowledgeable employees. 

More Affordable Than Ever Before 

As employee pension plans are finally phasing out, the 401(k) is becoming the most popular form of retirement investing. This means that more affordable options are coming out to business owners who are looking to institute this type of employee benefit. No longer do business owners need to struggle with paying tons of money to financial advisors. Now, they can simply design and maintain 401(k) plans for their employees through simple web-based applications. 

As you can see, there are many reasons why business owners should seriously be thinking about offering their employees a 401(k) plan. These are not just great for the employees, but they are fantastic for the employers as well. We highly encourage any business owners out there who are not currently offering this type of retirement program to seriously look into doing so