Here are several reasons why 401(k)s
are an excellent choice for the small business employer. Small businesses are eligible:
Any business — whether it is a C Corporation, S Corporation, partnership, sole proprietorship, or self-employed — can establish a 401(k) plan. Employers have greater control regarding eligibility:
The employer sets eligibility requirements at the time the plan is established. Additionally, they can also restrict individuals with less than 1 year service, union members, non US citizens, part-time workers, etc., from being eligible for the plan. Contribution flexibility:
Contributions to a 401(k) plan can come from employees' voluntary contribution, from the employer or both. Each individual employee can defer up to $16,500 per year. Participants who are at least 50 years old can contribute an extra $5,500 per year.
Employers can establish a vesting schedule, within certain guidelines, for the contribution the company makes to the 401(k).
Employers are not required to make any contribution to the 401(k), although the employer may have some obligation to contribute if plan is considered "top heavy" after annual non-discrimination testing.