|
 Retirement
plans are a valuable option for a businesses considering providing
solid benefits to employees. There are several types of retirement
benefits to consider:
A 401(k) plan allows employees to give a portion of their
earnings to a retirement plan on a pre-tax basis. The employer can
choose to match contributions in order to encourage employee
participation.
An Employee Stock Option Program, or ESOP, is a retirement
plan that invests primarily in employer stock. Contributions into an
ESOP are tax deductible up to 25%. This allows employees a sense of
ownership and share in the company growth.
A Defined Benefit Plan is the only qualified retirement plan
that gives employees a guaranteed retirement benefit. These plans
allow the participant to cash out upon retirement or draw a monthly
benefit based on compensation and years of service. Defined benefit
plans are ideal for smaller employers unable to save for retirement
in their early years.
Profit Sharing Plans allow employees to share in company
profits and give the employer flexibility in determining the amount
of annual contribution.
A 403(b) plan is similar to a 401(k) plan but has different
rules on contribution limits and requirements.
Reasons employers offer retirement benefit plans:
-
Attracting
and retaining key employees.
-
Flexible
contributions on a before-tax basis.
-
Employers
receive tax deductions for contributions to employees’ accounts.
-
A mix of
employees, owners and managers.
-
Potential
growth through investments in stocks, mutual funds, money market
funds, savings accounts, and other investment vehicles.
-
Contributions
and earnings generally are not taxed by the Federal government
or by most State governments until they are distributed.
-
Allow
participants to take their benefits with them when ever they
leave.
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