The importance of plan design cannot be understated. Proper plan design is based on the company’s objectives.

In short, there are only three reasons for a company to sponsor a 401(k) plan:

• To provide an employee fringe benefit in order to attract and retain personnel
• To put away money for business owners tax deferred
• The company does prevailing wage work

Consider the following examples, and the reason each company might choose to sponsor a 401(k) plan:

Ex: Dentist office, highly paid, 5 employees:

• To provide an employee fringe benefit in order to attract and retain personnel – 20% (somewhat important)
• To put way money for business owners tax deferred – 80% (very important)
• The company does prevailing wage work – 0% (not applicable)

Ex: Small manufacturing facility, 182 employees, hard to get help:

• To provide an employee fringe benefit in order to attract and retain personnel – 90% (extremely important)
• To put way money for business owners tax deferred – 10% (minimally important)
• The company does prevailing wage work – 0% (not applicable)

Ex: Contractor, 104 employees, 60% of work is prevailing wage:

• To provide an employee fringe benefit in order to attract and retain personnel – 15% (somewhat important)
• To put way money for business owners tax deferred – 15% (somewhat important)
• The company does prevailing wage work – 70% (very important)

Each company’s unique business circumstance, and the relative level of importance placed on the three reasons above, determine the best fit when designing a 401(k) plan. Each company’s workforce, the ability to communicate with this workforce, the company’s internal office processes, and other considerations all affect a plan’s optimal design.

Whether an existing plan or a new plan, we start with what the company is trying to accomplish, then customize a plan together.