Which kind of retirement plan can a 1,500-employee for-profit corporation establish?

Rationale

A) 401(k).

A 401(k) plan is a retirement savings plan that is specifically designed for employees of for-profit corporations and allows both the employer and employees to contribute to individual accounts, which can grow tax-deferred until withdrawal.

A (401(k).) CORRECT

This option is the correct choice as it is the most common retirement plan available to employees of for-profit businesses. A 401(k) allows for pre-tax contributions, which can significantly reduce taxable income for employees while providing a robust savings vehicle for retirement.

B (403(b).) YOUR ANSWER

A 403(b) plan is designed for employees of non-profit organizations and certain public sector employees, such as teachers and hospital workers. Since the question specifies a for-profit corporation, this type of plan is not applicable.

C (Keogh.) YOUR ANSWER

Keogh plans are retirement plans specifically for self-employed individuals and unincorporated businesses. As the question pertains to a for-profit corporation with employees, this type of plan does not fit the scenario, making it an incorrect choice.

D (Simplified Employee Pension Plan.) YOUR ANSWER

While a Simplified Employee Pension Plan (SEP) can be established by for-profit corporations, it is typically used by smaller businesses or self-employed individuals. Given the context of a 1,500-employee corporation, a 401(k) is a more suitable and popular option for larger companies.

Conclusion

In summary, a 401(k) plan is the most appropriate retirement plan for a 1,500-employee for-profit corporation, allowing both employer and employee contributions while providing tax benefits. Other options like 403(b), Keogh plans, and SEP plans do not align with the structure and needs of a large for-profit organization, reinforcing the suitability of the 401(k) as the best choice.

Which kind of retirement plan can a 1,500-employee for-profit corporation establish?

A) 401(k).

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