Advantages for Employer Offering SEP

jmarkk1

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What are the advantages for an emoloyer offering a SEP vs. a 401k?
What are the limits, etc?
 
I know that fees are lower but why would any employer keep with 401k and not do SEP?
 
Habits and lack of understanding. You have to show them.


In my case we had a 401k in place, very poor participation, but you pay fees on everybody, even those who don't participate as they get "tested" and paid for, even if they never participate.


I like Simples because they are just that. You follow the rules and there is no testing. No fees from the plan design. Any fees or expenses come from the investment company. Not the plan design.


In the case I am referring to, I presented the fees paid to a TPA and what they would do inside a simple instead. The employer putting money into the employees account, rather than paying a 3rd party. Just a better use of fees.


Most of the time you get friction is because the owner really doesn't want to deal with it. Showing them that the cost of running a 401k usually gains them a fruit basket at year end vs. using that money to give to employees. Sort of the employees fruit baskets. :)


And yes, there are different contribution Caps with different plans. That said, most people don't max their plans. If you're going for participation this is one way. If it's just about a few people putting as much as they can into something. Maybe not the way.
 
Quite different from a traditional pension plan, a 401(K) is an investment plan for retirement solely sponsored by the employer. A self-defined contribution plan, here an employee is allowed or is given the facility of investing a decent chunk of his income into the plan on regular basis. The amount that is invested can be decided by the employee and they can invest a small or big amount depending on their income or will.

The traditional pension plan as well as 401(k) have their respective benefits and are suited for people with different financial perspectives as well as outlook. The debate concerning the pension plan vs. 401(k) benefits and suitability will always emerge with diminishing popularity of the former. The benefits related with 401(k) outweigh the merits of pension plan and makes it popular among investor friendly employee.

A greater number of employers are opting for 401(k) pension plan scheme in their organizations and it is certainly the future of retirement savings and investment system.
 
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