A profit sharing 401k plan is a described contribution plan where the employer can contribute to the 401k plan. These types of 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 sharing 401k plans offers a few some other advantages:
Strong Recruiting Tool
These plans can be a very effective way from getting top talent. Many job hunters recognize the benefits of these plans plus realize how they can help drive their retirement plan. Many newer businesses can really benefit from this plan in helping getting top talent to join them earlier. This can also provide a tool in helping keep employees motivated to truly help the organization get more business and make a lot more sales.
Flexibility In Profit Sharing Contributions
Businesses have a large amount of flexibility in determining what if anything to lead to the profit sharing 401k strategy. In addition , the money does not have to come from income which means they can still make contributions even in down years. In fact , the only stipulation is that the IRS requires that they not need too many consecutive years go by exactly where no contributions are made. No specific number of years has been given for this stipulation.
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Flexibility In Different Types of Contributions
This method provides more flexibility than a conventional 401k plan where generally only matching contributions, if anything, is definitely given to the 401k plan with the employer. Here, matching contributions and extra profit sharing contributions can be provided.
With advantages like these, it is easy to understand why profit sharing 401k plans 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.