401(k) Plans

Plans

401(k) Plans

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401(k) Plans allow employees to invest in their retirement accounts, while also providing employers the ability to match a percentage of contributions. PlanPerfect is a premier 401(k) TPA and works with companies of all shapes and sizes.

What is a 401(k) Plan?

A 401(k) Plan is an employer-sponsored plan that allows employees to make pre-tax contributions to their accounts. Plan contributions are made through payroll deductions. The maximum an employee can contribute to a 401(k) plan in 2019 is $19,000. This limit is adjusted each by the IRS and is often referred to as a “Cost of Living Adjustment.” Participants over the age of 50 can make “catch up” contributions to a 401(k). For 2019, the catch-up amount is $6,000 (in addition to the $19,000).

401(k) plans must satisfy strict IRS ratio and compliance testing. These tests ensure the Plan benefits all employees in a nondiscriminatory manner.

401(k) Plan Pros & Cons

The Pros of a 401(k) Plan

Beyond the portability of benefits, the following are some pros of adopting a Cash Balance Plan:

  1. No Employer Contributions – Employer contributions are not required for 401(k) plans.
  2. Flexibility – If the employer chooses, they can make a safe-harbor, discretionary matching and/or profit sharing contribution.
  3. Optional Participation – Employee participation is optional.
  4. Save for Retirement – Current Tax Deduction – Employees are able to save for their retirement and reduce their taxable income (through a traditional 401(k)).

Possible Cons of 401(k) Plans

  1. Non-discrimination tests – 401(k) plans must comply with IRS rules and regulations to meet non-discrimination standards. If a 401(k) plan fails a non-discrimination test, this must be resolved. One way to resolve this is through the use of a Safe Harbor Contribution.

As your third party administrator, PlanPerfect will work with you to discover the best retirement plan set up for your business.

401(k) TPA: PlanPerfect

Finding the right 401(k) TPA is important for your business. PlanPerfect works with companies of all shapes and sizes. Explore our services and contact us today for a free consultation!