In the decade of the 1970s, defined benefit plans were all the rage. Owners of companies were able to put a large sum of money away for their retirement and the retirement of their employees and enjoy a sizable tax deduction for doing so. Soon, Congress looked at these plans as a loss of tax revenue and created legislation to make it more difficult and expensive to maintain these plans and less advantageous to the owner to implement them.
In the early 1980s, 401k plans were born and we helped increase their popularity. These plans put more of the burden of retirement saving onto the employee.
In the 1990s, technology allowed participants to be treated as sophisticated investors by creating daily valuation of accounts, web access and mutual funds tailored to the needs of 401k plans.
Today, technology continues to improve 401k plans. We can design plans that give participants complete access to their accounts investing in the finest mutual funds in the market. Plans can contain provisions for participant loans. Roth contributions can be offered in addition to the traditional deductible 401k contributions. Owners can benefit their higher paid employees by implementing new comparabilty allocation formulas. Plans can adopt safe harbor provisions to make the annual compliance testing unnecessary.
There are many things we can do to make your 401k plan benefit your employees. Contact us to see where your plan can be improved.