All About 401K Retirement Plan With Its Benefits in United States

Overview of the simple 401k retirement plan

The new and modified simple 401k plan is designed based on simple IRA plan and traditional 401k plan. The plan is not available for small businesses with less than 100 employees. The plan is available for employees of 21 years and older. Below is the detailed overview of 301k plans with its features and benefits.

Benefits of simple 401k plan:

No testing:

For the employees that go with traditional 401k plan, they require to undergo many testing phase. These tests range from medical, physical and mental health of employee. Different testing are in compliance with traditional 401k plans regulations. While on the other hand simple 401k plans have hardly any testing involved. Also the simple 401 k plan is quite beneficial for even small business owners who can hardly undergo any of the testing have required in traditional plan. Also as there is no testing involved in simple 401 k plan, the cost for administration is quite less.

Loans allowed:

The major reason why simple 401 k plans are also known as portable pension retirement plan is mainly because loans are allowed in this plan. It is an attractive feature because most of the business owners like the idea that the employee’s retirement plan is flexible. Moreover employees like it beneficial as they can borrow their own funds when in need. The loan can be easily repaid by employees with interest on funding own account. 

Eligibility criteria for employees:

In order for specific employees to be eligible for the simple 401k plan, employees are required to be serving an employer for minimum of 1 year term. The employee is also required to be of age 21 or higher to be eligible for applying simple 401k plan. The simple IRA plan is without any age restrictions. An employee who has earned $5000 or more in the couple of preceding years and is expected to earn $5000 or more is allowed to participate in the plan. 

Notice requirement:

It is the duty of the employer to generate and provide a notice for each eligible employee every year. The employers are required to provide a 60 day prior notice before a specific employee is able to participate in simple 401k plan. The notification is mainly to allow an employee to make any salary-deferral he/she would like to make. It’s the duty of employer to inform its employees about the simple 401k retirement plan features and its benefits prior before the plan comes in effect for a particular employee.

Deadline:

 A simple 401k plan has establishment limit. The plan can only be established from January 1 to October 1. An exception does exist for new business that comes into effect after October 1. For such business an exception is made to get the plan established as quickly as possible on administrative scale.

Bottom line for the simple 401k plan:

Compared to most other retirement available, simple 401k plan are highly flexible and offer great portability in terms of funds. Simple 401k plan offer great interests on saving. Also in case of availing a loan from plan, the loan interest rate is quite low. Therefore the simple 401k retirement plan can be of great benefits to all types of employees.

(Source: supplementalsocialsecurity.wordpress.com/)