The main benefit is saving for retirement. Employers who perform economic due diligence on the use of defined benefit plans, defined contribution plans or a combination on both are likely to design the optimal retirement scheme for their company and employees. Often employers use the benefits to recruit top talent and retain skilled employees that are highly valued.
Many times those who generate income for the firm are called “rainmakers” and are highly sought after in competitive markets. Even highly organized operational experts that run the day-to-day operations are of equal value to a company. Some organizations use additional compensation perks that are generally discriminatory and categorized as non-qualified plans to lure major players in the market place and retain the bench strength of their existing personnel.
Qualified plan benefits can save significant tax dollars every year. In addition, defined contribution plans like 401(k)s allow individuals to defer up to $18,000 of income (2017 limit). And for older contributors ages 50 or more can contribute an extra $6,000 into your 401(k) plan in 2017. The sum of employer contributions and your salary deferral contributions cannot exceed $54,000 in 2017 ($60,000 for individuals over 50 years of age in 2017).
Jodie Dailey is a co-contributor to this press release.