Three Big Myths About Business owners believe 401 (k)

John told me in clear words: "My 401 (k) uses the signal me anything!"

"Why," I asked?

"Do not let me distinguish between employees earn more and earn less, for one. She did not allow me to revise my thoughts on change. And, worst of all, the 401 (k never allowed) for me, was a bad year. If you do not have the money, or I delete the plan or provides, "said John.

John, like many entrepreneurs, according to the three great mythsfor 401 (k) plans. It 'just that when not doing what he wants. But the problem is not the law. The real problem is that the characteristics inflexible (k are written in his 401) the current document, if not required by law.

These three myths are not to be k (in 401) plan to take over inclusive. In other words, the law is much more flexible than the average 401 (k) document, which comes from your financial institution. Why did not youYou say? It 'too much work to do it well. You want to work as little as possible for the tickets.

Here is the truth.

The law allows the owner-centric plans. This means that employers have the right to distinguish the worthy from unworthy employees. Until it is wired to see the plan, the employer can reward an annual determination as to which category of employees. No joke. This includes family members who work forYou.

Thus, the "first great myth is that the owner can not determine the benefits of the plan. The truth? The owner is entitled to a determination of who may enter the floor. Furthermore, this discovery will be made fresh each year.

The second myth is that large contributions, once determined, can never be changed. Not true. Not only entrepreneurs can decide each year which is in the plan, but also because, for each category of employees involved. This isenormous flexibility.

Also, why is not the owner of the company said that? Why 401 (k) k institutions need commodities 401 () expects to increase revenue. This means that the drawings of the boiler plate, press the auto-pilot. To obtain the necessary flexibility means individual annual testing discrimination. The rules not only allow discrimination of individual annual audit, but also you can choose the one that each year the fourteen testapply. This provides tremendous flexibility for businesses, but it's just too much work for most 401 (k) provider favorite driver-car business model.

Finally, the "third great myth is that the entrepreneur can never experience a bad year. In other words, once determined the shape of the plan, the same amount of money has helped out every year without fail. Even in this case is not true! More information can be found not to hard-wire formula in the plan, theBusiness owner can choose fresh every year, if he / she will not contribute to the plan at all! As we all learn to change things for the economy. Rasch. Your 401 (k) has the ability to change with the environment.

The inflexibility entrepreneurial experience is not the law itself, but the plan document for its 401 (k) plan. The law itself is much more flexible. The wise entrepreneur does not need to see a plan that reflects thisflexibility allowed by law.

So, remember that you can decide who or which do not belong in the k (401 plan) a. You can choose fresh each year exactly how much those who participated. Finally, you can have a bad year and decide to do something without destroying your plan. The law does not give rise to these myths. Your current 401 (k) vendors have these for you. The truth is better. Much better.