As an article in Newsday notes, however, even the smallest of businesses should consider offering 401(k) plans:
- In fact, thanks to the Economic Growth and Tax Relief Reconciliation Act of 2001, which made changes to the laws governing 401(k) plans, even solo entrepreneurs can now afford to have their own plan--
- Of course, for companies with employees, there are other options: the traditional 401(k), the simple 401(k) for businesses with 100 or fewer employees, and the safe harbor 401(k), explains Carlos Tariche, senior benefits consultant at Chernoff Diamond & Co. Llc, a benefits advisory firm in Garden City.
- While the traditional 401(k) in most cases does not require an employer to make matching or profit-sharing contributions, the other two plans have mandatory annual employer contributions, he says. They are designed, though, to ease the administrative burden on the plan sponsor by eliminating some of the compliance testing required under a traditional 401(k), notes Tariche.
If you are interested in learning more about your 401(k) options, there are a few resources the Newsday article mentions that may help. You can check the Profit Sharing/401k Council of America's (PSCA) website, a nonprofit advocacy for companies that offer defined contribution programs for their employees. The U.S. Department of Labor also provides an overview of 401(k) programs for small business owners.
Let us know if you have any tips to share from your experience choosing a retirement plan for your firm.