Question 26

A 1,500-employee for-profit corporation can establish a 401(k) retirement plan.

A 401(k) plan is specifically designed for for-profit corporations and allows employees to save for retirement through pre-tax contributions, making it the most suitable option for a company of this size.

A) 401(k)

This option is correct as 401(k) plans are commonly utilized by for-profit corporations, allowing both employees and employers to contribute to retirement savings. Given the size of the corporation (1,500 employees), a 401(k) plan is a practical and advantageous choice for facilitating retirement savings.

B) 403(b)

This option is incorrect because 403(b) plans are intended for non-profit organizations, public schools, and certain tax-exempt organizations. A for-profit corporation would not be eligible to establish a 403(b) plan as it does not align with the regulations governing these retirement plans.

C) Keogh

This option is also incorrect. Keogh plans are primarily designed for self-employed individuals or unincorporated businesses, rather than large for-profit corporations. Thus, a 1,500-employee corporation would not typically set up a Keogh plan.

D) Simplified Employee Pension Plan

This option is not suitable for a large corporation either. A Simplified Employee Pension (SEP) plan is intended for smaller businesses or self-employed individuals. While it is an option for retirement savings, it does not match the needs of a corporation with 1,500 employees.

Conclusion

The 401(k) plan is the only option that aligns with the needs of a large for-profit corporation, allowing for substantial contributions and tax advantages for both the employer and employees. All other options are either intended for non-profit entities or smaller businesses, making them unsuitable for a corporation of this scale.