How to Provide Pension Plans to Employees
A qualifying pension plan, such as a 401k, can be an important factor in helping you retain good employees. Employee 401k contributions and employer matches, within the limits of the tax laws, are not taxed at the time they are made and continue to grow tax-free. These funds are also usually flexible and portable so that employees can roll them over to individual retirement accounts or other qualifying plans.
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Instructions
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Provide Pension Plans To Employees
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Consult with your company's accountant and tax and financial advisors to consider their suggestions for all types of pension options before deciding upon a specific type of pension plan. Solicit their suggestions for specific plan vendors.
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Involve your employees in reviewing proposals for pension plans and recommending the best plan for your company. There are many reputable vendors providing pension plans, including securities firms and payroll services. A volunteer employee committee can establish review criteria and narrow the list down to two or three finalists.
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Provide a 401k plan as the primary pension benefit for your employees. 401k plans are offered widely by other companies and are the pension benefit of choice for most employees.
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Select a pension plan vendor with a proven record of excellent plan administration, user-friendly support, an attractive array of investment choices for your employees and low administrative fees.
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Decide how much you want to commit to pension plans for your employees in the form of matching funds and additional employer contributions. Many companies commit to a minimum matching percentage, then supplement it with an additional "profit sharing" match based on annual corporate results. However, you can establish a pension plan and allow employees to fund their accounts without committing to any employer contributions.
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Maintain your volunteer employee committee for ongoing review of your pension plan administration, investment choices, fee structure and user friendliness. Let this committee provide direct feedback to your plan vendor and to you as company decision-maker.
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Evaluate your pension plans annually and solicit comparison bids from other vendors. Your vendor may be willing to reduce administrative costs as the amount of invested assets increases.
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Tips & Warnings
Help your employees get solid advice on how to handle their pension accounts and make sure they understand that any equity-based fund can lose money in any given quarter. Schedule occasional panels on fund selection, tax implications and the handling of issues, such as borrowing from pension plans.
