It seems that 401(k) plans have become the retirement plan of choice for many businesses. While they offer many advantages for the company and the employees, there are several issues that should be considered when evaluating them.
Why have a 401(k) or any other type of retirement plan?
What is a 401(k) plan?
A 401(k) plan is a company-sponsored profit-sharing plan that allows employees to defer a portion of their wages into investment options of their choice. Employers have the flexibility to make contributions and can offer some form of matching contributions to their employees. The employer contribution flexibility and employee contribution aspects of 401(k) plans are part of the reason so many companies have chosen this form of retirement plan. The employer match and the investment flexibility of many plans are some of the reasons that now more than40 million Americans are choosing to participate in 401(k) plans.
Why consider a 401(k) plan?
If your business has many employees and you want to provide an appealing employee benefit to retain control over some aspects of a retirement plan, a 401(k) plan may be the most attractive alternative. This form of retirement plan can also allow for larger contributions than many other types of plans.
Key aspects of a 401(k) plan.
The 401(k) plan must be made available to all employees who are at least 21 years of age and worked at least 1000 hours. It may also be made available to part-time employees who have three consecutive years with 500 hours of service.
Investigating 401(k) plans further
The key parties needed for establishing and administering a 401(k) plan are an administrator and an investment manager. Many investment managers, including banks, mutual fund companies and some investment advisors, offer special bundled programs that include administrative services as well as their investment management options. There are IRS and Department of Labor filing requirements with 401(k) plans that can be part of their services as well.
What do employers need to know about the NJ Secure Choice savings program?
Businesses that meet the criteria for NJ Secure Choice must enroll all employees who are at least 18 years of age, work full or part time and receive an annual Form W-2, Wage and Tax Statement – those who receive Form 1099-NEC, Nonemployee Compensation – are excluded.
Which employers does this affect?
NJ Secure Choice applies to for-profit and non-profit employers in the public sector who have:
Businesses with fewer than 25 employees may also participate in NJ Secure Choice, but are not required to do so.
When does it take effect?
The anticipated implementation date was March 28, 2021, but the program deadline was extended one year due to COVID-19. The revised deadline to begin implementation is March 28, 2022, with nine months from the start date to complete the roll out, though an official schedule has not been announced. Similar plans in other states rolled out their programs in phases – 100+ employees, 50+ employees and 25+ employees – each with different qualified implementation periods.
How can employers comply with the NJ Secure Choice Savings Act?
Employers have to either implement NJ Secure Choice by their assigned deadline or offer their employees a qualified retirement plan through the private market.
At Provident Bank, our financial advisors can assist with a financial review for you and for your business.
Please visit www.providentinvestmentservices.com for more information.
*INSURANCE AND INVESTMENT PRODUCTS ARE: NOT FDIC INSURED – MAY GO DOWN IN VALUE – NOT INSURED BY ANY FEDERAL GOVERNEMENT AGENCY –NOT BANK GUARANTEED – NOT A DEPOSIT.