A profit sharing 401k plan is a described contribution plan where the employer may contribute to the 401k plan. These contributions can be from profits or even elsewhere and the amount is normally based on a formula that allocates to each participant a certain amount each year. Over and above this benefit, you will find that profit revealing 401k plans offers a few various other advantages:
Strong Recruiting Tool
These plans can be a very effective way in getting top talent. Many job seekers recognize the benefits of these plans plus realize how they can help drive their retirement plan. Many newer companies can really benefit from this plan in helping obtaining top talent to join them early. This can also provide a tool in helping keep employees motivated to truly help the business get more business and make a lot more sales.
Flexibility In Profit Discussing Contributions
Businesses have a large amount of versatility in determining what if anything to contribute to the profit sharing 401k plan. In addition , the money does not have to come from revenue which means they can still make contributions during down years.
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In fact , the only stipulation is that the IRS requires that they not have too many consecutive years go by where no contributions are made. No specific number of years has been given for this stipulation.
Flexibility In Different Types of Contributions
This method provides more flexibility than a traditional 401k plan where generally just matching contributions, if anything, is usually given to the 401k plan by employer. Here, matching contributions and additional profit sharing contributions can be provided.
With advantages like these, it is easy to understand why profit sharing 401k plans really are a popular choice for many businesses. They offer something for both the employer and worker alike and that can be a great way to assist build a business and keep your workers happy in the long run.