Reasons to Offer a 401 (k) Plan
This article is targeted to those employers who want to attract the high caliber employees to their companies. What most potential employees search for when deciding to apply with a particular company is stable and competitive base pay, medical insurance and a beneficial 401 (k) plan. It has been proven by several researches that these three benefits attract qualified workers, which in turn greatly increase the profits of the company.
As a result you should concentrate your efforts on the construction of competitive 401 (k) plans and other benefits in order to provide yourself with qualified workforce.
401 (k) Plan
Under 401k plan employees are allowed to allocate a certain amount of money, which will later serve the purposes of a retirement income. The establishment of 401k plans has been largely supported by the government since employees provide themselves with an income for their retirement years, which greatly reduces their dependence on social securities.
Under 401k plan conditions employees are provided to allocate a fixed amount of money before their income is taxed. This money goes to provided by a bank trust account. The 401 (k) accounts can be also opened in an authorized financial services company. After this the allocated money are being invested by the corresponding entity in mutual funds, stock, bonds and etc.
Each employee has his/her own 401 (k) plan account and the money are held separate. The profits that employees acquire from the investments made are tax deferred. Additionally, the accounts benefit from compounding interest. However, the employee is liable to penalties and taxes if s/he decides to retrieve his/her money before reaching retirement age.
If your company employs more than 10 workers, sponsoring a 401k plan will provide them with an excellent opportunity to allocate a particular salary deferral. Additionally, the employer himself/herself can make contributions on behalf of the employees. Since a 401k plan is one of the most flexible types of retirement plans, it is up to the employer to determine its exact requirements and structure.
Reasons to Establish a 401k Plan
As an employer you should consider the establishment of a 401k plan because of:
- Tax advantages
By establishing a 401 (k) plan you will benefit from the many tax advantages that it provides. As for the employees, they will enjoy growth that is deferred from taxes.
- High quality employees recruitment
As mentioned in the beginning of the article, highly qualified employees search for companies that provide some kind of a retirement plan, since they want to provide for their retirement years. Additionally, almost every company provides its employees with some sort of a retirement plan. Therefore, we doubt that you want to lag behind and risk the valuable employees going to the competitor.
- Display of care toward your employees
By providing your employees with a 401 (k) plan opportunity, you show them that you care about both their wellness and retirement security. It has been proven that employees cannot fully rely on social securities throughout their retirement years in order to maintain their current lifestyle. That's why retirement plans add up to the missing portion and enable employees to keep their way of life even after retirement.
- High quality employees' retainment.
In return to their high quality work, qualified employees expect high quality payment and benefits.
Finally, you should carefully consider the benefits of 401 (k) plans and don't deprive your employees from the opportunity of providing for their retirement years. Otherwise, you may be deprived from their valuable services.
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