No matter the industry, nearly all of my small business owner clients have the same challenge: a difficult labor market. With staffing shortages now the norm, good employees are hard to find….and when you do hire them, they are in the crosshairs of headhunters and your competition! A well-designed 401k plan can play a valuable role in attracting and retaining employees. Key suggestions:
- Safe Harbor Match: this allows Highly Compensated Employees (generally speaking, owners and those making over $130,000) to fully contribute to the plan. Without a Safe Habor match, your most important employees may be severely limited in how much they can contribute to the plan (due to lower contributions from other employees).
- Discretionary Profit Sharing: allows supplementary contributions to be made at the employer’s discretion (i.e., only after profitable years). Longer vesting schedules are allowed on profit sharing contributions, thus rewarding your most loyal employees. Additionally, there are multiple formulas for determining profit sharing calculations, so you can tailor the program to your particular goals and work force.
- Roth and Pre-tax Deferrals: for many employees, the ability to contribute Roth (after-tax) funds to the plan is a huge win. This is important not only for younger employees in lower tax brackets but also for higher income employees who are no longer eligible to fund a Roth IRA.
Stay tuned for next month’s article highlighting key 401k insights!
Conor R. Kelly, ChFC
The ETF Store, Inc.
“This communication is for informational purposes only and should not be regarded as an offer to sell or as a solicitation of an offer to buy any financial product. Please contact an investment advisor before making any investment decisions.”