Plain and Simple: Bright Business Insights Spring 2019 | Page 7
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independent of your business. Another added benefit is the ability either because they don’t have the financial means to invest a portion
to make Roth pre-tax contributions with the same limits as 401(k). of each pay, or because they just don’t see the benefit. Don’t fall victim
Roth IRA contributions are limited at certain income levels, but to these misconceptions – a 401(k) plan is actually more feasible,
not when you make Roth contributions in a 401(k) plan. valuable and engaging than you might think. Let’s debunk three
Provides you with additional tax advantages. Contributions
made by the company on behalf of employees are tax-
common misconceptions.
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Administrative difficulties. While the IRS may mandate
deductible. Additionally, there is a $500 tax credit available for employer contributions and requires certain rules to be followed
three years to help reduce the administrative cost of operating when sponsoring a 401(k) plan, technology has made running
your 401(k) plan. these plans much easier. Enlisting a third-party administrator
(TPA) is a great way to cut down on the administrative work while
While there are a wide range of benefits associated with setting up
ensuring that your plan is compliant, which gives you more time
a company 401(k) plan, there are also some hurdles to be aware of.
to focus on running your business.
For example, if you’ve never had or offered a 401(k) plan before, you
might assume they are time-consuming and expensive to operate and
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that, even if you offered one, your employees wouldn’t participate,
Employees won’t participate. Rea & Associates provides TPA
services for numerous 401(k) plans. The majority of those plans
have more than 75 percent employee plan participation, with
many plans closer to 90 percent. The key to plan participation
is employee education, which a good TPA and a 401(k)-focused
financial advisor will provide to you and your company.
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Can’t afford an employer match contribution. While an
employer match is not a requirement for a 401(k) plan, it is a
great perk that encourages more employees to save. With the
proper help, you can design a plan that is cost-effective for you,
as the employer, while providing a meaningful benefit for your
employees.
When working with a TPA, you can tailor your plan to meet your
specific needs as well as those of your employees. Furthermore, there
are many options for small business owners to offer these plans at an
affordable price. When you couple the benefits of saving for your own
retirement with the tax advantages of offering a 401(k) plan, you can’t
afford not to offer this tremendous benefit for your employees. The pros
truly outweigh the cons. Just be sure to find a plan administrator who
offers a wide range of options, employee education, fair fees and proven
experience. If you are interested in getting the ball rolling, give me a
call. I would be happy to discuss your 401(k) plan options with you.
by:
Steve Renner, QKA
Principal
122 Fourth Street NW
PO Box 1020
New Philadelphia, OH 44663
330.308.6849
[email protected]