As a small business owner, you may think offering a retirement plan to your employees is too costly or complicated. However, there are many benefits to providing a retirement plan, especially a 401(k) plan, that can help you attract and retain talent, save on taxes, and secure your own future. Of the 34% of small business owners offering retirement plans, 63% said they offer the plans because it’s the right thing to do, while another 53% said their employees appreciate and expect the benefit, and 51% said the plan helps recruit employees. Let the statistics speak for themselves. However, if you still don’t feel compelled to offer your employees a benefit they want and need, we’ve compiled a list of advantages. But first, let’s start with the basics.
What Is A 401(k) Plan?
A 401(k) plan is a type of retirement plan that allows employees to contribute a portion of their salary to a tax-deferred account, where it can grow over time. Employers can choose to match some or all of the employee contributions or make profit-sharing contributions to the plan. There are different types of 401(k) plans, such as traditional, safe harbor, SIMPLE, and solo 401(k) plans, that have different rules and requirements.
Why Offer A 401(k) Plan?
There is a plethora of benefits to offering a 401(k) plan to your employees. Beyond being a cornerstone of financial security for employees, a 401(k) plan serves as a beacon of loyalty, attracting and retaining top talent in today’s competitive job market. Let’s get into the benefits:
- Employee retention: Offering a 401(k) plan can enhance employee retention by providing a valuable benefit that encourages loyalty and long-term commitment to the company.
- Competitive advantage: A comprehensive benefits package, including a 401(k) plan, can make your company more attractive to top talent, giving you a competitive edge in recruitment efforts.
- Tax advantages: Both employees and employers can benefit from tax advantages associated with 401(k) contributions. Employees can enjoy tax-deferred growth on their investments, while employers may be eligible for tax deductions on contributions made to the plan. In addition, there are tax credits resulting from SECURE 2.0 legislation that may help lower the cost for some employers starting a new 401(k) plan.
- Employee financial security: A 401(k) plan helps employees save for retirement, fostering financial security and peace of mind. It empowers them to take control of their future and plan for a comfortable retirement.
- Employee engagement: Providing a 401(k) plan demonstrates a commitment to employee well-being and financial literacy. It can lead to increased employee morale and overall satisfaction, which can positively impact productivity and workplace culture.
- Flexible contribution options: 401(k) plans typically offer flexible contribution options, allowing employees to contribute a percentage of their salary and adjust their contributions over time to suit their financial goals and circumstances.
- Employer matching contributions: Many employers offer matching contributions as part of their 401(k) plan, providing employees with an additional incentive to participate and save for retirement.
- Automatic enrollment features: Some 401(k) plans offer automatic enrollment features, making it easier for employees to start saving for retirement without taking proactive steps to enroll.
- Investment options: 401(k) plans allow employees to tailor their investment strategy based on their risk tolerance, investment objectives, and time horizon.
- Portability: 401(k) plans are portable, meaning employees can typically roll over their account balances into another qualified retirement plan if they leave the company, providing continuity in retirement savings.
Offering a retirement plan to your employees is not only a smart business decision but also a way to show them that you care about their well-being and future. By providing a 401(k) plan, you can help your employees achieve their retirement goals while also benefiting your own business and personal finances.
401(k)s For Small Businesses With A PEO
To recruit and retain quality employees, retirement plans are an essential benefit; however, they come with a lot of complexity and risk. At GMS, we understand that’s probably the last thing you want to worry about. That’s why when you partner with us, we take on that administrative burden. As a small business owner, you can finally offer that retirement plan you’ve debated adding to your benefits package for years.
By partnering with us, we cut costs, reduce stress, save time, and offer benefits your employees want the most. Contact us today to learn more about our retirement plan offerings so you can attract and retain the top talent you want and need.