Business Retirement Plans

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Traditional 401(k)s have a number of benefits and drawbacks for small business owners to consider when deciding if 401(k) may be their best option.

Traditional 401(k)s have a number of advantages including: To read more about Traditional 401(k) costs from different providers, check out our article on the 6 Best 401(k) Companies for 2018.401(k) plans can be provided by Professional Employer Organizations (PEOs) like Justworks, HR benefits software including Gusto, or independent retirement providers like Human Interest, which uses technology to offer a low-cost administration service. Visit Human Interest One growing trend among retirement benefits is qualifying 401(k)s for Safe Harbor.

Of all small business retirement plans, Traditional 401(k)s offer employers the most flexibility for matching.

Employers can structure any matching formula they want (including profit-sharing) – or not match at all.

Retirement plans help business owners save for retirement and attract the most talented employees.

There are 6 main types of small business retirement plans that allow pre-tax contributions each year by employers and/or employees.This testing must be conducted annually, with corrective action taken before year-end if the plan is not in compliance.Additionally, Form 5500 must be filed annually with the IRS.Safe Harbor 401(k)s are best for businesses that have high employee turnover or too many plan assets among owners or highly-compensated employees.These businesses run the risk of violating annual compliance testing with a traditional 401(k), but are exempt if they qualify their plan for Safe Harbor – making it easier for owners and high-earns to contribute more.The IRS has a strict process for setting up a 401(k).The effective date of a plan can be anytime, but employers must adopt the plan during the same tax year for which the plan is effective.Safe Harbor 401(k)s have the same contribution limits as 401(k)s but make maximizing contributions easier because Safe Harbor 401(k)s are exempt from annual compliance testing that sometimes causes plan assets to be returned to high-earning employers, increasing their tax bill and reducing the amount they’re putting away for retirement.To qualify for Safe Harbor, employers must match at least 4%.Typical 401(k) costs include: Unlike some IRA alternatives, 401(k) contributions come from both employers and employees.Contributions are a combination of employee salary deferrals, employer matching, and profit-sharing payments by employers when they choose to contribute.

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