Offering a company managed 401k plan is a nice perk for an employee and for small business owners might make the difference when it comes to attracting new personnel as well as keeping your existing ones. This type of retirement plan becomes especially attractive to employees when you offer some sort of contribution to the plan as well.
Most companies opt into this with some sort of matching contribution agreement over a certain percentage of the employes salary or a sliding scale based on the employees contribution. Either way it is a win-win situation for both parties.
When you match their funding in any form it encourages employees to make the type of contribution that will bring the maximum match in funds from you, their employer. Not taking advantage of a matching plan is simply them throwing away a cash gift every payday. The financially aware wage earner will usually pump the maximum allowed by law into the fund as this is pre-tax salary money used to fund the 401k retirement plan.
You and your small business benefit from this improved relationship that a sound retirement plan brings about and you get a special something for yourself as well in the form of an IRS Tax break. You as an employer, can take these matching fund contributions as a tax-deductible business expense.
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