Long Beach, CA – FAQ’s About 401(K) Policies from an Employee Insurance Provider

In today’s job market, providing a 401(K) is not only essential to attract top talent, but it’s also expected by almost all job seekers. Retirement plans sponsored by employers used to be reserved for high-paying, white-collar jobs, but in recent years, 401(K)s have expanded to every industry and even small businesses must offer them to keep up.

Our team is made up of experts in employee benefits and we have helped companies all over Southern California build the perfect benefits package for their teams. We specialize in several business services, including financial and insurance packages as well as administrative assistance in areas such as payroll and human resources, and more.

In today’s article, we’ll tackle some common questions we get surrounding 401(K)s and discuss how they can impact your company.

What is a 401(K)?

A 401(K) is a special type of retirement plan which must be put in place by the employer and has tremendous benefits for the employees of a company that provides the 401(K). The biggest benefit of a 401(K) is the ability for an employee to contribute to a retirement account before taxes are taken out of their paycheck. In the same way, taxes and insurance are removed, so can these retirement savings.

Employers can set up different types of retirement account options for their employees, including traditional or Roth IRAs. Without a 401(K) in place, an employee can open their own IRA, but they must contribute their own money, which is post-tax.

What is a company match?

Companies can elect to contribute to employees’ 401(K) accounts as well, through a process typically known as matching. When an employer elects to match, they can select a percentage of the employee’s salary to contribute to the retirement account, provided the employee does as well.

Conventional wisdom says the employee should always contribute to the company match, if not more. If a company offers a 3% matching program, an employee can elect to contribute 3% of their salary to the 401(K) and the employer will match this 3% on each paycheck.

The higher the matching percentage, the better the retirement plan for the employee and the more costly it will be for the employer.

Is a 401(K) necessary?

If your intention is to recruit, hire and train the best of the best employees on the market today, a 401(K) should be an essential part of your benefits package. Prospective employees hold a 401(K) with a generous match in high regard, and the details of the 401(K) offering can be the difference between landing the perfect candidate and them taking a job with your competition.

401(K)s are becoming common in every industry, so it’s a good idea to determine what the standards are among your competitors and at least try to be in the same range, if not better, than what they are offering. If your company is not offering a 401(K) at all, it will be very hard to retain people long-term, especially since they can’t effectively plan for retirement without one.

If you have more questions about 401(K)s, give us a call today!