Thursday, July 25, 2024

Total Guide to 401(k) Plans for Small Businesses

Providing a 401(k) to your employees shows you are truly invested in their future with your business. The retirement benefits can help employees to save for their future retirement, provide your business with tax savings and act as a valuable employee recruiting and retention tool. Big, medium, and small businesses can offer their employees a retirement plan. If you want to set up your small business retirement plan, with the help of the 401k providers at Ubiquity you will first need to choose the best retirement package for your small business.

Retirement Plan Options

Traditional vs Roth

In traditional accounts, the contributions are deducted from the salary before the taxes are subtracted. On the other hand, With Roth accounts, the tax is deducted from the salary before the contributions are deducted. When the employee withdraws the contributions from a traditional account during retirement, they will be taxed. However, when withdrawals are made from Roth accounts, they will not be subjected to taxing.

Individual or solo 401(k)

It was designed for small enterprises who do not have any employees apart from a spouse. Furthermore, the contributions are made through elective salary deferrals and profit sharing. This plan enables the participants to contribute a higher percentage of their income than they would have if they were using other retirement plans.

Safe Harbor

This plan satisfies non-discrimination testing because the employers either choose to make non-elective contributions or match contributions from the plan participants.

Simplified Employee Pension (SEP) Plan

These plans are usually offered by self-employed individuals. They are actually similar to SIMPLE IRA except for one main difference; only the employers can make contributions. Thus, employers have a lot of flexibility in when they contribute and the amount of each contribution.

Employee Stock Ownership Plans (ESOPs)

ESOPs allow businesses to offer stock to their employees and keep the shares in a trust. After the employee exits the company, the business buys the vested shares back from the employee, and the money goes to them either fully or in periodic payments, depending on the plan. One main advantage of ESOPs over other forms of retirement programs is they encourage and incentivize employees to care about the overall performance of the company because they want the value of their own shares to grow.

Cash-Balance Plans

If you are working with older employees, then cash-balance plans may be a good option for you. This account is similar to a traditional retirement plan, but there are two main differences; the investments grow on a fixed percentage annually and the contributions are age-dependent, which means, the older the employee, the higher the contributions they can make since they have fewer years to save before retiring. Therefore, if your company is in an industry dominated by older employees, then you can attract many employees and retain top talent when you offer a cash-balance plan.

Profit-Sharing Plan

In this plan, the employees are given a share of the profits that the business makes. The employees receive a percentage of the business’s profits based on its quarterly and annual earnings. Moreover, it is the company that decides how much of the profits it will share with the employees. Thus, it adjusts as needed depending on whether profits are made or not. Sometimes it can make zero contributions and, in the years that it contributes, it will have to come up with a formula for allocating the profit.

In addition, the company is the only one that contributes to the profit-sharing plan. Therefore, employees cannot make the contributions too. The profit-sharing plan is a genius way of incentivizing the employees to work harder to increase the revenue of the business. The more profits the enterprise makes, the more money the employees stand to get from the profits.

Benefits of a retirement plan

Retirement plans are beneficial to the employer and employee as well. For instance, they help to not only attract but retain employees, they enable participants to choose how much they want to contribute to the plan, and they benefit employers and employees in different levels and ranks. Furthermore, they allow the employees’ contributions to grow through investments in bonds, stocks, money market funds, mutual funds, and savings accounts among others. In addition, they offer big tax benefits to both the employers and workers. When employers want to exit the company, they can take their benefits with them and ease the administrative responsibilities.


If you believe that your business and your employees can greatly benefit from a retirement plan, you should contact reputable 401k providers who can help you establish and run the plan smoothly.

Sam Allcock
Sam Allcock
Sam heads up Cheshire-based PR Fire, an online platform that has already helped over 10,000 businesses to grab widespread media coverage on their news at an extremely accessible price point.

Recent Articles

Related Stories

sakarya escort bayan Eskişehir escort bayan