401(k) Plans For Businesses

Written by True Tamplin, BSc, CEPF® | Reviewed by Editorial Team

Updated on January 04, 2023

401(k) plans for businesses are by far the most common type of 401(k) plan in use today.

Although labor unions and professional organizations can also use this type of plan, they are found primarily with private employers.

The rules and regulations for these plans are the same as for any other type of 401(k) plan.

The employer has the power to determine features such as matching contributions, the vesting schedule, loan provisions and plan eligibility.

There can also be a profit-sharing element added to the plan at the employer's discretion.

Self-Employed 401(k) Plan

401(k) plans are used by most businesses to attract and retain quality employees as well as to add an asset to the business's balance sheet.

Self-employed businesses can sponsor a self-employed 401(k) plan, where the sole proprietor can make contributions both as an employee and the employer.

SIMPLE 401(k) Plan

Employers that do not want the administrative responsibility of sponsoring and administering a qualified 401(k) plan can use a SIMPLE 401(k) plan instead, which is a much simpler type of plan.

This type of plan does not have the same strict record-keeping and nondiscrimination requirements that come with all traditional plans.

 

401(k) Business Financing Plan FAQs

What is a 401(k) plan?

A 401(k) plan is a retirement plan offered by an employer designed to help employees save for retirement.

What are 401(k) Plans for Businesses?

401(k) plans for businesses are by far the most common type of 401(k) plan in use today. The rules and regulations for these plans are the same as for any other type of 401(k) plan.

What is the difference between a Roth 401(k) and traditional 401(k)?

With a Roth 401(k), taxes are paid as money is put into the retirement account. With a traditional 401(k), taxes are paid as money is taken out.

Are there other retirement savings plans other than a 401(k) plan?

Alternatives to 401(k) plans include traditional IRAs, Roth IRAs, pension plans (if your employer offers one), and 403(b) retirement plans for employees of non-profit organizations.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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