Simple 401(k) Plan Advantages and Disadvantages
What is a simple 401 (k)?
The SIMPLE 401 (k) is a simple cross between a traditional IRA and a 401 (k). Small businesses with fewer than 100 employees, and other institutions are eligible and give all workers over 21, who worked for a year calendar. Here is a summary of some of the features and benefits of their relationship with a traditional 401 (k).
Advantages of a simple 401 (k)
The advantages of the simple 401 (k):
* No comment – The employer of a traditional 401 (k) may be necessary to carry out certain non-discrimination and top heavy testing to ensure compliance with regulatory requirements. These plans, however, does not need these tests can be very interesting for a small business owner who likes the features of the 401 (k), but can not afford the costs of administering the tests.
* Loans must not: This is planning an interesting feature of qualified staff, because, and business generally like the idea, to use their own funds and pay their loans and interests, their own accounts. The role of loans is presented in both simple and traditional 401 (k).
Disadvantages of SIMPLE 401 (k)
The disadvantages of the SIMPLE 401 (k):
* Acquisition of immediate contributions – With a traditional 401 plan contributions from employers (k) may be subject to a vesting program, contributing to high turnover can. However, contributions to a simple 401 (k) are transferred from 100% immediately, which means that a worker who meets the requirements, the distributions they can receive their remaining debt canceled at any time.
* The contribution limits are low – the contribution limits for this type of plan are below the limits of a traditional 401 (k).
* A limited plan – an employer can not hold any other plan for employees who will participate in the plan involved established. However, if certain conditions are met, an employer who is a traditional food can choose to create a SEP, profit sharing or other defined contribution plan, the two come together and allow employees eligible to participate in both.
A simple 401 (k) is an economical alternative to traditional 401 (k). It is not necessary to prove discrimination and the administration is also easy.
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Posted in Retirement Investments | 
Tags: 401 (k), business, loans, simple 401 (k), small businesses, traditional IRA