Your clients may provide company-sponsored retirement plans for their employees, but are your clients participating themselves? The greater question may be, are they even aware that they can participate in their company-sponsored retirement plan?<\/p>\n\n\n\n
In your discussions with your clients regarding their retirement plans, inform them that they can also participate if they are not currently doing so. There are a few options your clients can choose from, let\u2019s take a look at them and the necessary eligibility requirements.<\/p>\n\n\n\n
Business owners can participate in their company-sponsored retirement plan if they are the owner or an employee <\/a>of the company that is sponsoring the plan. ePlan Services provides various retirement plans for employers as well as their employees.<\/p>\n\n\n\n This type of retirement plan is a straightforward and flexible savings solution. It is funded using a percentage of the participants’ pre-tax income. With a 401(k) plan, participants can also adjust their contribution amounts as well as choose whether to invest conservatively or aggressively. It is important to note that traditional 401(k) plans are subject to certain compliance tests to ensure that highly compensated employees such as business owners don\u2019t receive disproportionately larger benefits than non-highly compensated employees. These tests include the following:<\/p>\n\n\n\n A safe harbor 401(k)<\/a> functions much like a traditional 401(k) plan except that employers are required to make contributions to participant accounts to be considered a safe harbor 401(k). There are two types of safe harbor 401(k) plans:<\/p>\n\n\n\n A safe harbor plan is ideal for employers who are interested in exempting their plan from certain non-discrimination tests.<\/p>\n\n\n\n Does your client own their own business with no employees? In this case, a solo(k), also called an individual 401(k)<\/a>, makes a smart choice for them. Like a standard 401(k) plan, there are two methods of contributing to a solo(k) plan.<\/p>\n\n\n\n The biggest advantage of choosing a 401(k) over an IRA is the amount that participants can contribute. The contribution limit for a 401(k) plan and safe harbor 401(k) as of 2025 is $23,500. In contrast, the contribution limit for a traditional IRA is $7,000 and only $16,500 for a SIMPLE IRA.<\/p>\n\n\n\n This alone highlights how much more you can save for your future with a 401(k) account. An ePlan Services 401(k) also provides employers and participants with a participant dashboard that allows you to make changes to your account with just the click of a mouse. But these aren\u2019t the only benefits of a 401(k), let’s take a look at some of the others.<\/p>\n\n\n\n A safe harbor 401(k) plan permits four methods of profit sharing. A SIMPLE IRA doesn\u2019t allow profit sharing at all. Both plan types allow employer matching with slight differences.<\/p>\n\n\n\n Both SIMPLE IRAs and safe harbor 401(k)s offer immediate vesting for employer matching and non-elective contributions. However, with a safe harbor 401(k), there may be a two-year vesting period for an auto-enrollment plan. Safe harbor 401(k)s can also come with a vesting schedule for profit sharing contributions.<\/p>\n\n\n\n Participants are not permitted to take a loan out on a SIMPLE IRA. A 25% early withdrawal fee may be applied as well if the withdrawal is made within two years of participation. Safe harbor 401(k) accounts can allow participants to take out loans. The interest on the loan is repaid to the participants 401(k) account.<\/p>\n\n\n\n Business owners need to consider their own retirement as well, not just their employees\u2019. The earlier your clients begin saving for their future, the more time their funds will have to mature. In a time where Social Security won\u2019t likely be enough to live on<\/a>, your client\u2019s retirement funds can be a key source of income they need when it\u2019s time to stop working.<\/p>\n\n\n\n If your clients have done their due diligence by providing a retirement plan option for their employees, they\u2019re already showing that they care about their employees\u2019 futures. However, it\u2019s your duty as their financial advisor to ensure that they consider their own futures by participating in their company-sponsored retirement plans as well. Doing so can make all the difference in their retirement road ahead. <\/p>\n\n\n\n\nTraditional 401(k) Plan:<\/h2>\n\n\n\n
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Safe Harbor 401(k):<\/h2>\n\n\n\n
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Solo(k):<\/h2>\n\n\n\n
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Why should employers consider a 401(k) or safe harbor 401(k) instead of an IRA?<\/h2>\n\n\n\n
Employer contributions and vesting:<\/h2>\n\n\n\n
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Loans:<\/h2>\n\n\n\n
How can employers benefit from participating in a retirement plan?<\/h2>\n\n\n\n
Conclusion<\/h2>\n\n\n\n