401(k) Plan Design
Working to secure future advantages for you and your team
Establishing a 401(k) retirement savings plan for your dental laboratory can be easier than you think. By implementing a 401(k) plan, you will help your employees save for the future, while also securing your own retirement. What’s more, there are a number of tax advantages for both you and your employees.
A 401(k) plan is a defined contribution plan, so named for the Internal Revenue Service (IRS) tax code that governs it. With a 401(k) plan, you and your employees can save money toward retirement on a tax-deferred basis. Generally, no federal or state income taxes are paid on the savings or investment earnings until the money is withdrawn at retirement. However, any withdrawals before age 59½ may be subject to a 10% federal penalty tax.
When establishing a 401(k) plan, one of your first decisions will be whether to set up the plan yourself or to consult a professional or financial advisor. Using an advisor helps simplify the set-up process, which includes: adopting a written plan document; arranging a trust fund for the plan’s assets; developing a recordkeeping system; and providing plan information for eligible staff.
In creating a plan, you will also want to consider eligibility, vesting, and contribution limits. With respect to eligibility, it is not unusual to create a plan that has a waiting period—anywhere from 1 month to 1 year, for example—before an employee can participate. Although not required by law, you may choose to match a portion of the contributions employees make to their 401(k) account. In traditional 401(k) plans, you can design the plan so that your contributions become vested over time, according to a schedule. If a staff member leaves before your contributions are vested, he or she forfeits those amounts.
The IRS sets a maximum amount that an employee can contribute to a 401(k) plan in any given year. For 2013, that amount was $17,500 and workers age 50 and older may contribute an extra $5,000. A 401(k) plan is subject to a number of IRS reporting requirements. These include keeping the plan up to date with new laws, performing nondiscrimination tests, filing an IRS Form 5500 return each year, and providing benefit statements and other plan information to participants at least annually.
There are certainly many elements to consider when designing and implementing a 401(k) plan into your business. An independent financial advisor can work with you to make the process easier. In addition, you’ll gain a valuable ally and time-saving resource who will help you develop and maintain a solid strategy for your retirement plan. Finally, you will receive personalized attention and involvement at the level you want and need.
The Seiler Group of Raymond James brings over 70 years of combined experience to deliver tailored investment strategies.