Non-elective contributions are the amounts that an employer pays into a company-sponsored retirement plan, regardless of whether employees contribute to the plan or not.
Definition and Example
How do non-elective contributions work?
Advantages and Disadvantages
Advantages and Disadvantages
Non-elective contributions benefit workers by allowing them to increase their retirement savings beyond what they might achieve on their own. This can be an incentive for employees to remain with the company while helping businesses attract and retain employees. Another main benefit for companies is that non-elective contributions are tax-deductible for the employer. Non-elective contributions promote inclusivity by requiring employers to contribute for all employees rather than just high earners. Additionally, participation in basic security plans like 401(k) plans helps companies easily comply with annual compliance testing.
Keywords
Non-elective contributions, retirement, financing strategy
Sources
– Labor Institute. “Frequently Asked Questions About Retirement Plans and ERISA”, page 1.
– Internal Revenue Service. “Operating a 401(k) Plan”.
Source: https://www.thebalancemoney.com/what-are-nonelective-contributions-5224827
Leave a Reply