Choosing the right 401(k) plan is crucial for any business.
It's important to weigh your options very carefully and take a number of factors into account.
Find the key questions to ask yourself about 401(k) plans below!
Offering a 401(k) is a great way to attract and retain top talent for your firm. However, not every 401(k) plan is right for every business. Since each company is unique, they should choose a 401(k) plan tailored for them. But just what should be taken into account?
When looking into the right 401(k) plan for your business, be sure to ask yourself the following questions to determine which plan is right for you. Take a look below!
How Many Employees Do You Have?
While qualifying businesses of any size can offer 401(k) plans to employees, the size of your company and its revenue can impact which plan is best for you. Be sure to feel out numerous options to see what the fees are for each plan based on the size of your business before choosing the right one.
What is Your Budget?
Similarly, take your budget into consideration. If you’re a larger firm and don’t mind paying high fees for access to high-quality plans, then this isn’t really an issue. However, startups and small businesses should be more budget-conscious and look for plans that are more affordable to them.
What Investment Options Interest You?
There are three types of 401(k) plan designs: standard profit sharing plans, Safe Harbor profit sharing plans, and SIMPLE 401(k)s.
Standard plans give companies a lot of flexibility to make matching contributions and vesting schedules, while Safe Harbor plans are very similar but outright require that employers contribute to their employees’ accounts. SIMPLE plans are available to small businesses with less than 100 employees and are similar to Safe Harbor plans, requiring employer contributions with immediate vesting. However, they’re stricter when it comes to start and end dates.
What are Your Business Goals?
It’s also important to ask yourself what your business goals are. If you value long-term employee retention, you may want to choose a plan with a vesting schedule that maximizes just that. If you’re interested in certain market segments, try to seek out a plan with investment options tailored for them.
Do You Want to Match Contributions?
This is a key question that every business must answer. Matching contributions can offer a powerful incentive for employee retention, but cost money. Take a hard look at your budget, revenue projections, and headcount to see if matching contributions are something your firm can afford if interested in.
What is the Size of Your HR Department or Support Staff?
Lastly, don’t forget about how you’ll administer the plan. If you have a large HR department, you may want to consider more investment and plan design options for your employees. Smaller firms and startups, however, may not have the resources to do this and may want to keep things simple.
Choose the Best 401(k) Plan for Your Firm
401(k) plans have many advantages for employers, not just employees. By asking yourself these questions, you can better determine the 401(k) plan that’s right for you and your staff!