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Why 401 (k)?
A Guide to the definitions, qualifications and benefitsof 401 (k) for the small business owner.

What is 401 (k)?

A 401 (k) plan is a qualified retirment plan that combines tax-deductible employer contributions with the potential of a tax-deferred growth. 401 (k) plans allow eligible employees to contribute, or defer, portions of their income to the plan on a pre-tax basis. this lowers the participant's taxable income.

In some 401 (k) plans, employers offer matching contributions. Matching is when you, as the employe, contribute a portion of each eligible participant's deferral amount based

on a predetermined formula. the amount you (and certain highly compensated employees) can defer to your plan accounts is determined by the amount your other employees contribute.A 401 (k) plan may also be combined with a profit sharing plan. In a profit sharing plan, all eligible employees receive a profit sharing contribution from the employer, regardless of whether or not they contribute to the plan. Profit sharing contributions generally range from0-15% of an employees's salary. You may determine the percentage based on a number of factors, including the amount you wish to contribute for yourself, how much other employees are deferring, fees for maintaining the plan, and the overall costs of employee funding.

Do You Qualify?

Yes! Regardless of your particular business structure, you are eligible to establish a 401 (k) plan. Recent changes in the law have even made it possible for many non-profit organizasitions to establish 401(k) plans.

You also qualify to establish a 401 (k) plan regardless of how many employees you have. Whether you have one employee or 1000 employees, you can establish a 401 (k) plan.

And while it is better for you to have as many employees deferring income as possible, lower participation should not stop you from establishing a 401 (k) plan. Busines owners with lower participation often use the profit sharing option to increase their own contribution
to the plan.

What are the Benefits?
No matter which type of 401 (k) plan is in effect, there are several
key benefits.

For your employees, a 401 (k) plan:

  • is an excellent employee benefit
  • is an easy and painless way to save for retirement
  • allows eligible employees to save on current taxes and enjoy the potential of tax-deferred growth

For you, a 401 (k) plan:

  • attracts worthy candidates for employment
  • retains valuable employees
  • is often a less expensive alternative to other qualified plans which do not allow employee deferrals
  • has relativey modest set up and maintenance costs
  • allows your business tax deductions for contributions made on your employees' behalf ( including profit sharing, employee deferrals and matching contributions)

To obtain more information about, or to  purchase an annuity product, contact your agent or to receive information from us  Email us your request. Please consult with your accountant-tax advisor for tax questions. 



The information contained herein is not intended to constitute an offer to sell or a solicitation in connection with any product.