Employer 401(k) Plans
As part of their benefits package, employers often offer a 401(k) retirement plan to their employees. When money gets put into the employee's 401(k) retirement account, both the employer and employee receive a tax deduction. There are specific rules for an employer to follow. You can get these rules from the Department of Labour's division called the Employee Benefits Security Administration.
The account's funds can get invested in various stocks, mutual funds, bonds, or other assets. These funds don't get taxed on any dividends, interest, or capital gains until they get withdrawn. Usually, income taxes get withheld on the money you earn from your employee. With a 401(k), you avoid paying taxes in the current year, up to the legal 401(k) contribution limit that you pay into the plan. A salary deferral contribution is the amount that you put in. Your money then grows tax-deferred inside the plan.
Employer Contributions
There are three primary types of employer contributions, namely non-elective, profit-sharing, and matching. Employer contributions are pre-tax, too, and only get taxed at withdrawal in retirement.
Additional Rules to Follow
Multiple rules need to get followed, such as:
Determine who is eligible
Whether loans can be allowed
When can the money be paid out of the plan
The timing of when funds must go into the plan
Charles Schwab 401(k) Plans
Regardless of the size of your business, Schwab makes it easy to get an individually designed retirement plan for your business. Employees can make larger salary deferrals with a 401(k) than with other retirement plans, with your business getting tax benefits. Fees vary and get based on your business needs and solutions.
What You Get With a Schwab 401(k) Plan For Your Business
Business tax advantages
Tax-advantaged growth
A customizable plan
Optional employer-matched contributions
Higher employee contributions than what other plans offer
How to Apply for a Schwab 401(k)
It is a lot more expensive to use third-party payroll service providers, such as Paychex, Gusto, and ADP, to run your 401(k) plan. These third-party service providers are a lot more expensive with fees compared to going directly through Schwab. However, to get a 401(k) plan through Schwab, you need to work through an advisor to bring the plan to you.
An additional benefit is that Schwab holds the funds in a reputable custodian, whereas a third-party servicer outsources your money to another custodian, who then charges more fees. With an advisor-run plan, you can bring down the costs lower.
The Bottom Line
As an employer, it's essential to get a 401(k) retirement plan for your employees with the lowest fees. By using a third-party servicer, you will pay both them and the outsourced custodian fees. To find out how SK Capital can help you set up an employer 401(k) plan, you can contact us here for a free consultation. We can help you through the rules that need to get followed when applying.
If you are responsible for managing your company’s retirement plan and are concerned about your current investment options, I can help. My specialty is reviewing and adding 99% value to all of my clients’ retirement plans. Contact me today If you’re ready to get the most value from your company’s retirement plan and protect yourself from personal liability as your company’s fiduciary.