should I offer my employees 401k or IRA

June 12, 2024

by a searcher from Northwestern University - Kellogg School of Management in Chicago, IL, USA

what are the pros/cons as the business owner in which plan we offer? will do a ~2% match.
is the biggest con for employee the contirbution limit of $7k IRA vs $23k 401k?

Thank you for the insight!

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Reply by a searcher
from Northwestern University in Bozeman, MT, USA

Definitely worth noting the retirement plan tax credits available to employers under the SECURE Act, (which took effect in 2019 and was later expanded and revised in###-###-#### SECURE 2.0 rolled out $16,500 in tax credits over a plan's first three years. In addition an Automatic enrollment credit, Employer contribution cost credit, and Military spouse credit, for businesses with 50 or fewer employees, the credit covers 100% of administrative costs for the plan’s first three years (which is the biggest cost for most employers adopting a 401k.). Check out Guideline which is a pretty low cost robo solution and came highly recommended to us by our CPA.

Reply by an intermediary
from University of Portland in Hickory, NC, USA

We offer a 401(k) to our employees. I can't speak to the comparison. But as employee-owners we fully fund ours, plus we get the company match. Our plan also has an optional profit sharing component. So in some years I can choose to have the company contribute additional amounts to everyone's 401k account. For example, I could do another 3% of salary into everyone's account, including my own. There are some annual administrative tasks which I find annoying. But worth it considering how much I've been able to save. In addition to the 401k, I'm also able to personally contribute to a Roth IRA using the backdoor roth strategy.

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