401(k)

What is it?
Most financial analysts and advisers consider the 401(k) the key retirement planning investment vehicle. With the decline of company pension plans, the responsibility of saving for retirement is falling even harder on individuals. Businesses that offer these programs, which enable employees to invest pre-tax dollars and avoid paying taxes until withdrawal, will succeed in attracting and retaining quality employees.

A well-designed 401(k) plan should:

• Have generous matching contributions from employers


• Be open to the greatest number of your employees


• Include a variety of investment choices, in different risk categories


• Enable employees to manage their accounts easily


• Have reasonable costs for you

In addition, effective communication is essential to keep your employees informed about their choices. Many financial advisers say more people would invest in their employers’ 401(k) plans if they understood more about them.

Do I need it?
A 401(k) plan can be of value in at least three ways:

1. Retirement Planning. A 401(k) is a critical piece in your own retirement planning, as well as your employees.


2. Tax Benefits. A 401(k) can provide tax benefits on both a personal and company level.


3. Employee Satisfaction. A well designed 401(k) plan can help attract and retain quality employees.

Also, you might want to consider plans especially designed for small businesses. These “simple 401(k)s” are available for businesses with 100 or fewer employees. They are not subject to the complex tax rules that accompany other types of 401(k)s. You should consult a financial or insurance professional who is knowledgeable about these plans and familiar with small businesses in general, if not your business in particular.

More Information
For more information regarding Pension Plans and ERISA FAQs, please visit the U.S. Department of Labor's website at www.dol.gov.