Understanding Employer Contributions to 401(k) Plans
As an added benefit, many small businesses choose to offer an employee retirement plan, such as a payroll deduction IRA, a SIMPLE (Savings Incentive Match for Employees) IRA or a traditional 401(k) plan to their employees. While there is no law requiring companies to contribute to the retirement plan (with the exception of Simple IRA and SEP IRA plans), many employers do choose to make contributions because it’s an effective tool for hiring and keeping top-quality employees. Also, businesses receive a tax benefit for contributing to employees’ 401(k) accounts.
