Client: 401khoax.com
Article Number Title: 1a
“401K Laws”

401 (k) Laws are critical when running any business and hiring employees. It is important to understand these laws so that your rights and your employees’ rights are protected. In the United States of America, a 401(k) plan allows a worker to save for retirement by deferring current income taxes on money and earnings deposited in a separate account until withdrawal. The introduction of 401(k) retirement plans changed the ways workers saved. It shifted the focus from pension fund retirement plans to a then-nontraditional emphasis. The Internal Revenue Service has limits on the amounts that can be deposited. While this amount is subject to change by law each year, in 2008, for example, the limit was $15,500. This figure does not include any amount the employer decides to match.

Matching 401(k) contributions isn’t a requirement, but it is a factor in attracting talented employees and then retaining them. If employees feel valued and that their financial security is a priority, they will be less likely to leave. If offering a 401(k) plan is new to you, learn the basics and remember that your company can employ 401(k) administrators in-house or hire a company to manage the plans. Whether you’re a new or established company, there are some 401(k) plans basics to consider before you alter or begin a new plan:

* Be sure you understand the 401K Laws and structuring requirements of a 401(k) plan.
* Decide whether your company will manage the 401(k) plan.
* Educate your employees on the different 401K Laws and 401(k) plans and the options available to them.

At that point, it’s key to take certain action steps. Put together relevant information for your 401(k) retirement plan—the number of employees, the amounts, etc. Before you open such a plan, understand all the 401k law tax implications and structuring requirements. Such requirements exist not only for the company but also for the employee. The IRS has rules covering each aspect of a 401(k) plan. A company that doesn’t know or follow these rules can suffer severe penalties.

Contact the Internal Revenue Service about their 401(k) laws and plan information packet. (This can be as easy as running a Web search.) Examine the 401(k) retirement plans for small businesses tutorial from the U.S. Department of Labor to understand the benefits and the process of setting up contribution plan.

You will also need to determine how to manage a basic 401(k) retirement plan. You have basically two options. You can have a finance employee on your payroll manage the account or else hire an administrator from an outside firm. There are pros and cons with each option.