Finhabits, the leading financial app for bilingual workers in the United States, explains how businesses benefit from offering a retirement plan such as the Finhabits 401k.
Finhabits understands that your workers are an extension of your family. As the first financial wellness platform in both English and Spanish, we offer easy-to-manage 401k plans and health insurance to businesses of any size. Your employees can download our bilingual app to access educational tools and monitor their account.
What is a 401k plan?
A 401k plan is a retirement savings fund that companies offer to their employees. Workers can voluntarily contribute part of their income to a 401k fund while their employers can match each employee’s contributions.
In a traditional 401k plan, employee contributions are “pre-tax,” which means that they can reduce an employee’s taxable income. However, withdrawals are taxable. Tax scenarios may vary for each individual and each business. For more information about the potential tax benefits of using a 401k, you should talk with your tax advisor.
How can offering a 401k help your business? Here are three major benefits:
1. You can attract and retain better workers.
Finding and keeping good people is difficult for all companies regardless of their size. By offering a competitive retirement plan like a 401k, you can make your business a more attractive option for professionals that are looking for better jobs with better benefits.
With a 401k, employers can match a fixed percentage of employee contributions, which becomes an added benefit for the employees that contribute to their retirement funds.
Additionally, employers can match their employee’s contributions up to a percentage of annual income in exchange for tax benefits for their company. Remember to speak to your tax advisor about how your company can match an eligible employee’s contribution.
With a 401k plan, business owners may also be entitled to participate in your company’s 401k retirement plan.
2. You could receive tax credits.
Businesses that offer a retirement 401k plan may qualify for certain tax benefits. In order to help cover the costs of 401k programs, the IRS offers a tax credit of up to 50 percent of the cost of your plan during your plan’s first three years. A tax credit could reduce the amount of owed taxes to the IRS.
Here’s an example. With Finhabits, a business that offers a 401k plan for the first time, could qualify for a tax credit of up to $4,500 total over the first three years. The first tax credit is for 50 percent of the total cost. Plus, there’s an additional tax benefit of $500 per year for using the auto-enrolled feature.
3. You can avoid fines in states like California and Illinois.
More and more state governments are working on helping workers save for their retirement. As a result, some states have passed legislation that requires certain small and medium-sized companies to offer a retirement savings program to their employees.
As of today, there are 13 states (including California, Illinois, and Washington) that have a retirement savings program mandate.
Companies located in these states that do not meet the requirements or enrollment deadlines can be subject to fines. The total amount of these fines varies by state.
To learn more about Finhabits 401k plans, you can visit us at www.finhabits.com/401k or call us at 1-800-935-7214.
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