Comparing 401Ks with Other Small Business Employee Benefit Plans

I know that there are many employee benefit plans that I can choose to set up for my business. Why am I always recommended a 401K over the others?- Jason Bartholomew, Delaware, owns a café.

There are different options available to employers like you who are looking to make retired life easier for their employees by setting up an employee benefit plan for them. Although there are other plans, the SEP IRA and the 401K are the most popular ones. Your financial advisor is right in recommending that you establish a 401K plan instead of a SEP IRA because there are some special advantages this plan has to offer.

The first and most important one is that the 401K plan is a great way to encourage employees to save for their own future. Employee contributions are deducted directly from their paycheck even before they are paid. You can choose to match their contributions to boost employee morale and loyalty. In effect, your 401K plan puts the employee’s retirement planning firmly in his hands with help from you in the form of contribution matches. When you use an easy to operate software suite like http://401k-easy.com to manage the 401K, the employee can stay updated with his retirement planning account at all times. With a SEP IRA, only you, the employer, make the contributions. When your employee quits working for you, he/ she can simply walk away with the money in the IRA account.

Another important advantage of 401Ks is that you can opt for a vesting schedule so that only employees who have been with your company for a while can withdraw your contributions. This ensures that you are rewarding only those employees who have really contributed to your business.

About Elliot Earl, Director, Pension Trade Association
Director, Pension Trade Association Founded in 1982, the Pension Trade Association [California Domestic Nonprofit Corporation #C1629080] is dedicated to helping workers save for their retirement through expanded coverage of 401k -type defined contribution pension plans.

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