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.

Read our resource on SEP vs. 401K to see which one would be best for you!

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.

Make Sure you’re choosing the right plan and use PlanPerfect for all your retirement needs!

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!