Saving plans are very important as they have immense benefits for both employers and employees in a business. In fact the reason why some businesses attract more quality employees is due to the availability of aspects like tax breaks. The 401k retirement plan is one of the widespread plans that induces incentives and allows employees to save for their future. This article lists some important aspects to note about construction 401k plans.
Reasonable expenses. The costs of setting up the 401k plans do not have to be high as most construction business owners might expect. It can be easier for a company in this industry to set up such plans for an amount lesser than 10 dollars for each employee on a monthly basis. After setting up the plan, each employee gets a tax break of 500 dollars each year for a period of three years. Such costs and breaks make the plan lucrative for employers and employees.
Flexible and easy to compound. The investment in a 401k comes with a wide range of flexible options. The contributions that employers and employees make to the 401k are tax deductible. However, earnings and contributions are excluded from tax deductions. This can include things like dividend growths, interests as well as capital gains. The participants who choose to take long waits before withdrawing have longer tax deferrals.
Income deferments. The latest federal limits let all employees defer a maximum of 16,500 dollars of the amount they earn. The employees who exceed 50 years of age can however contribute an upwards of 5,500 dollars. Nonetheless, it is not a requirement for employees to allow the said contributions in the plans they have. This makes the plan clear and straightforward for low earning employees to manage.
Great timing flexibility. An employer has the option of implementing a plan of this kind at any time. A majority of the construction companies normally opt to make their implementation together with open enrollment. This means that they get to capitalize on the time they normally use to implement other employee benefits that may be available. As such, a company can easily manage the process with minimal pressure.
Great transparency of all the costs. Plan providers are required by law to give a detailed disclosure of all the fees they earn as a result of provision of these types of services. The disclosure is beneficial because it allows all participants of the plan to be more informed. As a result the participants can easily make better decisions when they are more informed about their investment chances.
Numerous types of options for investment. There are numerous options where the money an employee contributes might get invested in. Mutual funds, stocks, money market funds and numerous other forms of investment are just some of the main variations. Employees are free to dictate such investment options too.
Hence, the plan can act as motivation for current employees to stay on with their employer. It also can act as an incentive for new employees and construction owners. It should look to capitalize on its great benefits.