After securing a first real job, most individuals begin to save for their 401(k) plan. They do so by saving through tax-deferred plans that are designed and administered by their employer. A new form of 401(k) plan that is starting to get more, and more attention is the opt-out 401(k) plan.
In this form of saving, their employer automatically enrolls employees. Then, the employee contributes a bit of each paycheck to their 401(k) savings account unless they specifically decide to un-enroll themself. It can be a beneficial plan because it urges employees to start saving right away. Here are a few more advantages of using an opt-out 401(k) plan:
- The employee does not need to do anything to start building their 401(k) savings, which further increases participation.
- It can help you to hold onto your employees.
- The employee has control over their own account, and can make any changes if they desire.
- The employee will not have to pay as high of an income tax.
- Their investment will grow, tax-free!
- A 401(k) savings plan is the only way an employee can prepare for their retirement.
The key to instituting an opt-out 401(k) plan is to maintain open communication between the employer and the employee! The employee must be aware of all the benefits that are available to them.
If you would like individualized employee benefits assistance from an exemplary human resources solutions team, please contact HR Solutions & Brokerage, LLC, located in Lakewood. We offer a number of assistive services such as human resource counseling, benefits administration, retirement planning, and more! Give us a call, and let us help you take your HR department to the next level! We are excited to be an advocate to your business.