Posts Tagged ‘Small Business’

Setting up a 401k plan for your small business begins with obtaining a written document as the groundwork for your day-to-day plan operations. But before starting the plan document, you will be required to make a decision on which type of 401k plans that will suit your small business best.

There are three types of plan, and the first one is a traditional 401k plan which offers the maximum flexibility of all. Employers are entitled to making contributions on behalf of all participants, matching employees’ deferrals, or doing both. A traditional 401k plan also makes it possible for participants to make pre-tax contributions through payroll deductions.

The second type is called a safe harbor 401k plan. Unlike the traditional plan, a safe harbor plan must provide for employer contributions that are fully vested when made, and is not subject to many of the complex tax rules. However, both plans are available for employers of any size and can be combined with other retirement plans.

If you are looking for a specific small business 401k plan, you might want to consider taking the third type, a SIMPLE 401k plan. It was created to help small businesses make an effective and efficient way to offer retirement benefits to their employees. A SIMPLE 401k plan is not subject to annual nondiscrimination tests, but the employer has to make fully-vested contributions.