Reasons for an Employer Sponsored 401(k) Plan Why Have an Employer Sponsored 401(k) PlanGood for EmployersMost employers agree that their employees are their biggest asset; they are what can make an average company a great one! Offering a 401(k) plan is no longer viewed as a benefit, it’s an expectation. In today’s competitive employment market, prospective employees are more likely to ask what your 401(k) contribution match rate is than if you offer a plan at all. So if you want to recruit and retain the best employees, offering a 401(k) plan is a must.Aside from helping to attract talent, offering a 401(k) plan helps your business at tax time. Any funds you use to match employee contributions or pay administrative costs of the plan are tax deductible. You can also use your 401(k) plan to achieve company goals. Consider giving your employees the incentive of a higher contribution match rate if the company achieves its sales goals or other objectives. That’s a win for everyone.What are other benefits to the company?The cost is cheaper than other types of employer sponsored retirement plans. Employees fund a portion of their own retirement, which minimizes business costs.They provide assistance to gracefully retire long-service employees who are close to retirement and may be less productive.Tax deductions for contributions and administrative expenses are without corresponding current taxable income to the employee.401(k) profit sharing plans can motivate employees to take a more personal interest in the company’s success.It is possible to pay the entire cost of the plan by the employees through the plan itself.Employees appreciate that their employer is providing a way for them to save for their retirement. When employees save for their retirement they feel more secure regarding their future and may be less inclined to change employers.Are there any disadvantages?A 401(k) plan has strict non-discrimination tests and administrative requirements. Without a “safe-harbor” feature, highly-paid and owners’ employee contributions may be limited.Operational involvement. The plan requires some commitment from management.Good for EmployeesAlmost everyone wants to stop working some day. Social security by itself will not provide sufficient retirement income. 401(k) plans can be a powerful tool in promoting financial security in retirement. It allows participants to decide how much to contribute to their accounts on a before-tax basis. In addition:Saving is easy and convenient through payroll deduction - pay yourself first!Personal tax advantage. Contributions and earnings are not taxed by the Federal government or by most State governments until they are distributed.Since payroll taxes are reduced, take-home pay is not reduced by as much as the amount contributed.“Catch up” contributions are available for participants age 50 and older.The “Saver’s Credit” can provide lower income earners with additional government tax credits. (up to $2,000 for couples filing jointly with adjusted gross income under $55,500)Tax deferral of investment gains and often tax-advantaged methods of distributions.Employees usually decide their own investment mix, designed to match their own objectives. The money contributed will grow through investments in equity and bond type mutual funds, money market funds, savings accounts, and other investment vehicles.Usually provide access to funds prior to retirement from loans and hardship withdrawals.A 401(k) plan usually allows participants to take their benefits with them when they leave the company, easing administrative burdens.Jeffrey Eisenberg is president and CEO of SecuraWealth Investment Strategies, a Registered Investment Advisor. SecuraWealth Investment Strategies does not provide legal or tax advice. Please contact your attorney and/or tax advisor regarding any questions you may have specific to your situation. Information contained herein was obtained from sources believed to be reliable, but not guaranteed. Past performance is no guarantee of future results.Copyright ©2016 SecuraWealth Investment Strategies. All rights reserved.