A tax-advantaged employer-sponsored retirement savings plan that allows employees to defer wages on a pre-tax or Roth basis.
A 401(k) plan is a tax-advantaged retirement savings vehicle where employees can defer a portion of their wages into the plan on a pre-tax basis (reducing current taxable income) or a Roth basis (tax-free withdrawals in retirement). Employers can match employee contributions or make non-elective contributions.
401(k) plans require formal plan documents, annual nondiscrimination testing (or safe harbor election), and 5500 filings. For small employers, the compliance burden and fiduciary liability deter many from offering 401(k) standalone.
PEO 401(k) plans are typically Multiple Employer Plans (MEPs) — a single master plan covering all PEO clients' employees. This pools assets across many small employers, often reducing per-participant fees and simplifying compliance — the PEO handles testing and 5500 filings for the master plan rather than each client separately.
A tax-advantaged employer-sponsored retirement savings plan that allows employees to defer wages on a pre-tax or Roth basis.
A 401(k) plan is a tax-advantaged retirement savings vehicle where employees can defer a portion of their wages into the plan on a pre-tax basis (reducing current taxable income) or a Roth basis (tax-free withdrawals in retirement).
Most PEO buying decisions touch several related concepts at once. 401(k) plan typically comes up alongside the other terms in this category. Closely related terms include Employee Retirement Income Security Act (ERISA).
This is one entry from our PEO glossary covering payroll, benefits, workers comp, HR compliance, and PEO mechanics. Browse all terms.
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