401(k) basics for employers
401(k)s are increasingly common, with roughly $1 in every $5 that Americans have saved for retirement invested in 401(k)s. A 401(k) is an investment account that allows employees to contribute a percentage of their salary to a designated retirement account. Employers can choose whether or not to contribute an additional amount of funds, too.
What role does the employer play in a 401(k) plan?
Employers are not required to make contributions to employees’ 401(k) accounts, which can make overall costs more manageable. Still, many employers choose to match 401(k) contributions up to a certain percentage or based on a profit-sharing arrangement as an added benefit for their employees, at the employer’s discretion.
Why do employers offer 401(k) plans as an employee benefit?
One of the primary reasons companies offer 401(k) plans is to attract and retain top talent. A 401(k) is attractive to employees because it provides an easy, cost-effective way to save for retirement by making tax-deferred contributions to an investment fund. Employers can also deduct contributions made to employees’ 401(k) accounts.
Where should you begin?
Now that you have some basic information about 401(k)s under your belt, the next step is to consult your financial, tax, and legal advisors regarding your company’s retirement benefits. As you work through the process, consider how the plan fits your organization’s needs regarding size, flexibility, administration, and ease-of-use.
We’re here for your company now and in the future. Human Interest takes the hassle out of managing your company’s 401(k): compliance testing, recordkeeping, paperwork—even automating syncs with your payroll. We offer Traditional and Roth 401(k)s, 403(b)s, safe harbor plans, and profit-sharing plans — we’ll help you figure out what’s right for you. Employers can customize matching and vesting options.