Through a payroll system for small business owners, you can make getting 401(k) benefits as easy as possible. When 401(k) contribution plans first came out in the 1970s, many employers were afraid to get them because they thought the plans would be too complex or expensive. Thankfully, this is no longer the case for small business owners. Read on to learn how to set up 401(k) plans and offer them to your employees for limited upfront costs.      

How Modern 401(k) Providers Make Retirement Planning a Breeze

Payroll providers can make 401(k) setup as easy as possible by handling all of the work for you. On the administrative side, employers must track which employees are eligible, manage their contributions, maintain records, and report payroll data. When your 401(k) administrator is integrated with your payroll, you don’t have to handle all of these tasks. Providers like Asure manage these activities for you. 

Because of this, you can often turn to your payroll provider for help learning how to set up 401(k) plans. For example, Asure helps small businesses figure out their 401(k) setup and administration process. We also handle and record your 401(k) benefits for each employee. 

With the payroll system small business owners need, you can also get help with finding tax credits. Recent tax changes, like the Secure 2.0 Act, significantly reduce the administrative costs involved in starting a 401(k) plan. Plus, Secure 2.0 allows you to get a tax credit of up to $1,000 per employee for your matching contributions.

The Advantages of Integrating 401(k) Plans Into Your Payroll System

Instead of learning how to set up 401(k) benefits on your own, you can save time and energy by having your payroll provider do it. The best payroll for small business owners will integrate with 401(k) plans, so there’s no reason you have to handle this task on your own. By using a payroll system for small businesses as your 401(k) provider, you can enjoy some of the following benefits. 

  • Compliance: There are a lot of regulations involved in managing 401(k) contributions and retirement plans. For example, you have to provide eligible employees with a summary plan description (SPD). You’re also legally required to keep a careful record of all contributions and distributions. By turning your 401(k) benefits over to the professionals, you can make sure all of these legal requirements are met. 
  • Time, Money, and Energy: As a small business owner, you already have to wear many different hats each day. Outsourcing your 401(k) setup and administration to your payroll provider saves you the hassle of handling everything.    
  • Retirement Deductions: Because your payroll provider is already responsible for handling your payroll funds, they can easily track and manage retirement deductions from your payroll. 
  • Save Paperwork: When you work with an online provider, you can reduce the amount of paperwork you are responsible for printing, filling out, and storing. 
  • Improved Data Security: Financial institutions and software companies are already used to protecting their customers’ data through high-level encryption. By turning your employee 401(k) plan over to your payroll provider, you can ensure that your employees’ data is protected as well as possible. 

How to Set up 401(k) Benefits

The United States Department of Labor lists four basic steps involved in setting up 401(k) benefits for a small business.  

  1. Create a written plan document. 
  2. Make a trust to hold your plan’s assets. 
  3. Keep records. 
  4. Provide your employees with important plan information. 

If you hire a payroll provider to handle your 401(k) benefits, 401(k) deductions will automatically get deducted when you run payroll. The recordkeeping will also be handled automatically by the provider, so you don’t have to worry about it. 

What Are 401(k) Contribution Tax Credits? 

By enrolling in a 401(k) plan, you are setting yourself up for several new tax credits. When you have an employee 401(k) as a business owner, you can enjoy some of the following credits. 

  • Startup Costs Credit: You can get the startup costs completely covered if you have less than 50 employees. The credit is worth up to 100% of your startup costs, up to the greater of $500 in total or $250 per employee. If you end up getting the credit for $250 per employee, the maximum credit you can get is $5,000. 
  • Contribution Credit: If you have fewer than 50 employees, you can get a 401(k) contribution credit as well. During the first two years, you can get up to $1,000 or 100% of your contribution back, whichever is less. This figure drops to 75% in the third year and 50% in the fourth year. In the fifth year of the plan, you can get up to 25% of your employer 401(k) contribution back.   
  • Automatic Enrollment Credit: You are legally required to have a plan that uses automatic enrollment now. Once you have automatic enrollment set up, you can get a credit of $500 for a three-year period.
  • Credits for Military Spouse: If you employ someone who is a military spouse, you can get $500 if they participate in your 401(k) plan.

Choosing the Best Payroll for Small Business and Retirement Planning

When you look at a payroll system for small business owners, it is important to consider their data security, customer service, and accounting software integration. Thanks to the benefits of 401(k) setup options, you should also look for a company that knows how to set up 401(k) plans and manage contributions. By choosing the right provider, you can make sure your company can maximize its 401(k) benefits and tax credits. 

To learn more about 401(k) benefits and your company’s growth, connect with one of our small business payroll & HR experts today.

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