Types of 401k Plans for Small Businesses

I know about the traditional 401k plan. Are there other kinds I can choose for my small business? – Della Freeman, Texas

There are actually three kinds of 401k plans you can choose from if you want to set up a retirement plan for your small business. Here’s a brief overview of your options:

The traditional 401k is the most flexible among the three without doubt. As the employer, you choose if you want to make contributions towards every employee or match employee contributions. You can have a clause in your traditional 401k plan outline describing the vesting schedule you want for the contributions. Overall, this plan gives you much more control than the other two over how you and your employees make contributions.

A safe harbor 401k is the second type of retirement plan you can choose for your small business. Employer contributions are mandatory with these plans. You have to put in a certain level of contribution towards these plans for your employees. There is a variant of this plan you can opt for- the DASH or double advantage safe harbor 401k. With this plan, you add a profit sharing plan to your 401k that makes it interesting for your employee. The bigger tax benefits make it attractive for your business.

An automatic enrollment 401k is the third option you can choose. Every employee is automatically a participant in the plan and deductions are made directly from his/her paycheck every month and go right away into the 401k. You select default investments for your employees. But, you have the liberty to change the preferences if you so choose. This gives you enough flexibility with your contribution to ensure continued participation.

If you already have a 401k in place you can simply switch to one of these options by making use of a 401k software suite like the one offered by http://401k-easy-online.com/. With this kind of package you can take care of all the administration and tracking that is needed to be done with 401ks easily and quickly.

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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