Employers & 401k Plans

iStock_000002285748XSmall-200x300A 401k plan is very attractive to both company employers and employees. Are you interested in adding 401k for your business? Are you concerned of the liability, if any, that your company may take on with a plan as this?

Employers serve as the “plan sponsor” for 401(k) plans, but they don’t necessarily have anything to do with investing the money. Instead, as the plan sponsor, your company hires another company to administer the plan and its investments.

The plan administrator may be a mutual fund company such as Fidelity, Vanguard or T. Rowe Price, a brokerage firm such as Schwab or Merrill Lynch or even an insurance company such as Prudential or MetLife.

The employer sends employee payroll deductions directly to the company managing your plan. Employees can typically decide and are responsible for deciding how to invest their money among the options offered by your plan.

Typically, a 401(k) offers five or more mutual funds that invest in various sectors of the financial markets. Some 401(k) plans also offer shares of company stock.

The U.S. Department of Labor writes,”Offering a retirement plan can be one of the most challenging, yet rewarding, decisions an employer can make. The employees participating in the plan, their beneficiaries, and the employer benefit when a retirement plan is in place. Administering a plan and managing its assets, however, require certain actions and involve specific responsibilities.”

There are guidelines that need to be met by an employer under federal law. For instance, the law requires that participant contributions be deposited in the plan as soon as it is reasonably possible to segregate them from the company’s assets, but no later than the 15th business day of the month following the payday. If employers can reasonably make the deposits sooner, they need to do so.

For plans with fewer than 100 participants, salary reduction contributions deposited with the plan no later than the 7th business day following withholding by the employer will be considered contributed in compliance with the law.

Liberty Run Benefits

Liberty Run Benefits can navigate your business through 401k plans and options that suit your business and goals. The experience of our team and our diligence to customer service makes planning and implementing financial plans a seamless experience for our clients. Contact us to learn more.

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