Offering a Retirement Plan Benefits Your Staff and Your Business: Here’s How
As your company grows and thrives, you may be considering what retirement benefits to offer your employees. Alternatively, you may be tempted to default to a state-mandated retirement plan instead of sponsoring your own, if this is applicable for you. There are many different options for your business, but there’s one we find particularly advantageous: an employer-sponsored 401(k) plan.
Providing a 401(k) plan to your employees is an easy, cost-effective way to help your employees prepare for retirement and grow your company. Key benefits of adopting such a plan include an added advantage in attracting and retaining top talent as well as tax benefits for your employees and your company. Plus, if your 401(k) plan provider offers a comprehensive financial literacy program, you can make the most of your implementation costs and contribute to your team’s financial health by encouraging your employees to take full advantage of the plan. In other words, it’s a win-win.
How 401(k) plans offer tax benefits for you and your team
Both employers and employees alike can enjoy tax benefits provided by an employer-sponsored 401(k) plan. Employee contributions are typically deducted from their gross income and taken straight from their paycheck, deferring taxes on those effortless savings until the employee starts withdrawing from their 401(k) account later in retirement. By making regular contributions to a 401(k) plan, employees compound their larger pre-tax dollar investment.
Offering a matching contribution as part of the 401(k) plan allows employers to incentivize savings as they pass on their full pre-tax contribution to the employee.
In addition to the tax benefits on matching contributions, employers may also be eligible to claim a tax credit for starting a 401(k) plan. The credit may be up to $5,000 over three years and can be claimed to offset costs of implementing and administering the plan as well as educating employees about it.
401(k) plans are a valuable tool for attracting and retaining talent
A key component of growing and maintaining a successful business entails attracting and retaining top-tier talent at all levels of your organization. When selecting among job offers, benefits packages can influence a candidate’s decision considerably. Approximately 75% of retirement plans across all industries provide a matching contribution within their retirement plan, and a generous 401(k) plan may be what tips the scales in your company’s favor.
Let’s say you decided to match half of employee contributions up to 3%, meaning your employee would have to put in 6% of their total salary in order to get the full 3% match. This is a powerful incentive for employees who otherwise might only contribute 5% or less of their total salary. That matching 3% is essentially free money to them—and no one wants to leave money on the table.
Making an investment in your employees’ future may pay dividends in the long run. Considering the time and money it requires to recruit and train new staff, high employee turnover rates are costly to your business. A substantial matching contribution is a major incentive for employees, and can help retain them for years or even decades, while also serving as a powerful tool to attract the new talent you do need.
The more your company contributes, the more your tax deductions grow—and the more satisfied your employees will be. Everybody wins.
Personalized financial literacy programs help you and your team take full advantage of the plan
With all these considerations in mind, it is important to understand how a financial literacy program that accompanies a 401(k) plan is vital in maximizing your investment as an employer. Our financial literacy programs are designed to educate employees on the ins and outs of the 401(k) plan available to them.
We distinguish ourselves from other companies through our bi-lingual financial literacy programs created with the goal of empowering employees in understanding and maximizing their opportunity. Through our personalized financial literacy programs, we can ensure the majority of employees will participate, maximizing the investment made on plan implementation by the employer. Our program also aims to take the fear out of investing and guides employees towards wise investment decisions.
Most 401(k) plan providers do not provide personalized financial literacy programs. The result being employees who do not participate in their 401(k) plan because they do not understand their options, and employers who have wasted their investment.
We believe in the importance of financial literacy programs because employees with the tools to effectively manage their finances are more likely to spend their time on the clock focused and productive. A retirement plan gives employees a sense of security and boosts their overall financial health.
As a result, if your employees are doing well, then your company is better positioned to do well. Implementing a 401(k) plan is a smart and efficient way to contribute to your company’s growth, but not all 401(k) plans are the same. Be sure to partner with a 401(k) plan provider who cares about the financial health of your company.
Our retirement specialists are ready to help.