When you run a small business, it is important to make your employees feel valued and appreciated. One way to do that is to offer each eligible employee a 401K retirement plan. Matching your employee’s contributions helps give them peace of mind in knowing they will be able to support themselves when they start working. But while there are benefits for your employees there are benefits for you, as the business owner, too.
Business Benefits Of A 401K Retirement Plan
Offering your employees retirement means that you’ll receive tax credits that will help save your business money. To qualify for the tax credits, your business must not employ more than 100 people. As long as you meet the requirements, you will find that these tax credits reduce your yearly taxable income.
The IRS considers a 401K as a qualified plan. To comply with the standards set by the IRS, your business is required to share 401K information with employees regularly. It’s worth noting that several types of retirement plans are also referred to as defined contribution plans. This helps distinguish them from the traditional pensions many businesses offer retiring employees.
Who Can Obtain A 401K
In most cases, any employee you have that is at least 21 years of age can choose to obtain a 401K. Generally, it takes a full year of employment to qualify for this. One goal of the IRS is to ensure that a business is not only offering retirement plans to what is referred to as highly compensated employees(HCE.) This includes employees that earned a certain amount of money the previous year. It also includes any employee that owned 5% or more of the business during the previous calendar year.
How To Create A 401K Plan
The first step in creating a 401K retirement plan is to write one and send it to the IRS. You’ll also need to secure a trustee to help with the process. Once you have the plan in place, make regular contributions to it for each employee.
For more information on offering a 401K retirement plan, please contact DAL Commercial Capital.
