We all know that it’s important to create and maintain a solid company culture by offering benefits to employees and future hires. Deciding to implement a 401(k) plan into the company’s benefits package is a great place to start, but many company owners and executives initially shy away from establishing a 401(k) plan because they tend to only look at the cost and work associated with setting up and administering the plan.
 
While these are very important factors to consider, employers often don’t know about the numerous fringe benefits that implementing a 401(k) plan can also offer to the company. That’s right, I said company benefits. From tax savings to reducing costly turnover, here are some of the most common employer benefits of offering a plan to employees.
 
TAX SAVINGS

Tax savings is one of the most obvious benefits of a 401(k) plan, but its power is often overlooked. Although the more commonly known tax breaks are for the employees, there are also multiple tax breaks for an employer. Outlined here are two of the most common employer tax advantages.
 
TAX DEDUCTIBLE EMPLOYER MATCH

There are many options for setting up an employer 401(k) match or other employer contribution. If you haven’t decided yet whether to set up an employer match or not, it’s time to think again. It’s well known that employees can defer to their 401(k) pre-tax, thus reducing their tax bill each paycheck to Uncle Sam. What’s not as well known is that any employer match or contribution is also given from the company to employees on a pre-tax basis. This means that the more generous the match, the greater the tax deduction!
 
$1,500 TAX CREDIT

If you are establishing a 401(k) plan for the first time for your company, you are eligible to receive up to $1,500 dollars in tax credits. For the first three plan years that the plan is available to employees, you can receive a credit equal to 50% of your start up and administrative fees, with a maximum of $500 each year.
 
To qualify, you must have at least one plan participant who was a non-highly compensated employee (Less than 5% owner and makes less than $120,000), and you must claim the credit for ordinary and necessary costs to setup and administer the plan.
 
FLEXIBLE PLAN OPTIONS

Unlike most retirement savings vehicles that are available to companies, the 401(k) plan offers numerous provisions that can be changed to cater to each company’s objectives and goals. Whether the goal is to maximize company owners and executives tax savings, or to just simply offer a more competitive benefits package to employees, the 401(k) is the perfect savings vehicle to be able to accomplish whatever the goal may be. The plan can allow employers to adjust matching contributions, restrict certain employees from participating, add in vesting schedules, and much more. The possibilities are endless!
 
REDUCE COSTLY TURNOVER

Employee turnover is expensive! In fact, most experts believe that every time a business replaces a salaried employee, it can cost the company as much as 2x their annual salary! For a company to thrive in today’s economy, retaining good employees is a must. This is especially true for small companies that have to compete with large, multi-million dollar corporations with much larger budgets.
 
Nowadays, both employees and new hires are just as concerned with the benefits that their employer offers to them as they are with the salary. Implementing a 401(k) plan into a benefits package is a must and ensuring that employees are happy and well taken care of is especially important to help with turnover. Offering a 401(k) plan is a great place to start if you don’t have an employee benefits package.
 
Still not sure if starting up a 401(k) plan is the right move for your company? BenefitGuard is an expert in helping you understand all of the costs, risk, and work that are associated with setting up a new plan. Give us a call and we are more than happy to build a free proposal for your company.


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Jordan is a 401(k) Plan Consultant for BenefitGuard. He also is currently studying Accounting and Business Management at Utah Valley University. Outside of work and school his passions include golf, tennis, reading, ping-pong, lifting weights, and especially family.

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