Use new payroll tax to boost 401(k) rates
Now’s the perfect time to really push your employees to bump up their 401(k) contributions.Â
Reason: They can increase their retirement savings with virtually no impact to their take-home pay — thanks to President Obama’s extension of the Bush-era tax cuts.
The tax cuts include a one-year reduction in workers’ Social Security taxes, which changed from 6.2% in 2010 to 4.2% in 2011. This means employees will see an unexpected increase in their checks.
To really drive home the point, you may want to show employees exactly what the tax change will mean for them.
For example: An employee making $50,000 annually will save $1,000 per year because of the decrease in Social Security taxes.
That extra $1,000 could be added to his or her 401(k) without much change in the pay the person’s used to taking home.
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