401K plans come in all shapes and sizes. An attractive 401K plan plays a big role in attracting top talent. As a business owner or manager, you want to select and create the best 401K for both you and your employees.
A short list of everyday challenges come across our phone lines here at Leadingham Rodgers. Selecting a 401K plan is among the most common. The pandemic and economic climate have given labor immense power to choose between well-paying jobs. Many of our clients are struggling to calibrate savings against ensuring that prospective employees will find their benefits package equal to or better than your competitors’.
That’s why we’re going to take a quick yet thorough look at how you can find the best 401K plan for your business.
Establishing Your 401K Plan
401K plans don’t grow on trees! Much like your business, they’re built from the bottom up. The good news is that our expert benefits CPAs here at Leadingham Rodgers consult on all matters surrounding the setup process. Setup involves four general checkpoints:
- Adopting a written plan document
- Arranging a trust for the plan’s assets
- Developing a recordkeeping system
- Providing plan information to employees eligible to participate
Establishing Your Own 401K Plan
Establishing your plan depends largely on whether you choose to create your own or rely on a provider. Businesses that choose to establish their own 401K plan are tasked with adopting the written document. Some businesses have or hire someone to perform this task. The documents should outline the basic tenets of the plan and the options provided.
While adopting your own plan may save some money, consider this fact: 401Ks can be quite time-consuming. They require focus and attention to detail. Relying on the experts here at Leadingham Rodgers allows you to focus on your core business goals. Our CPAs can walk you through the pros and cons of establishing your own 401K plan or choosing from a bevy of wonderful providers.
Selecting Your 401K Plan
These days, the range of choices stretch wider than ever. Here are the most important and foundational decisions you or your advisor will need to make.
Employers can choose between traditional, safe harbor, or automatic enrollment plans. Traditional plans permit more flexibility. Long story short, you can toggle options such as contribution and matching amounts for individual employees.
Naturally, traditional plans are more labor intensive. Automatic enrollment, on the other hand, is more set-it-and-forget-it. Automatic deductions from employees’ paychecks go into preassigned investments. Safe harbor plans require you as the employer to make annual contributions to your 401K plan.
Your Commitment To The Plan
The most important aspect of your decision should rest on what kind of time, energy, or resources you can allocate to the plan. Traditional plans demand your attention to specific investments. This puts pressure on you as an employer to also understand capital markets and what works best for your workers’ retirement.
There are plenty of other factors. Plans can include Roth 401Ks, in which contributions are taxed up front but not when employees make withdrawals in retirement. A great plan also offers employees a choice between more and less aggressive investment strategies. Either way, Leadingham Rodgers can help you decipher the best 401K plan for your business.
Matching means that you will allocate to an employee’s 401K precisely how much they choose to allocate from their paycheck. Matching takes many forms. Some employers match up to a certain dollar figure or percentage of employees’ paychecks.
Regardless, matching is one of the best ways to attract top talent. Think about it this way: The stock market returns roughly 10% a year. By matching your employees’ paychecks, you’re offering an immediate 100% return on investment. It would be foolish of them to turn down free money!
Considering The Costs Of Each 401K Plan
Should you create your own plan? Choose a big-name provider? What investment options are providers offering? These questions can only be answered by considering the costs.
Most big companies match these days. But be honest with yourself. Can you and your business afford it? Should you curate your own traditional plan so that specific employees receive matching? Or might you be better off motivating your employees if you offer a profit-sharing agreement?
When it comes to creating the right 401K plan for your business, there are countless options to choose from. Leadingham Rodgers can review your finances to determine whether or how you can incorporate matching, and other services, into your 401K plan.
Leadingham Rodgers Can Help Build Your 401K Plan
Building the right 401K plan for your business can attract the best talent in the job market. But spending beyond your means to do so can hamper your business’ growth. Leadingham Rodgers’ 401K consultants can help you build a plan from scratch or find a provider that fits best with your needs. Contact us today for your free consultation.