A 401(k) is the most common retirement vehicle offered by employers in the United States; however, the proportion of small businesses offering a retirement plan remains low. Below are some of the reasons why your company should consider offering a 401(k) plan:
- Help eliminate your employees’ retirement anxiety
- Workers are not saving enough for retirement. According to a 2017 Employee Benefit Research Institute survey, only about half of American workers feel confident about their retirement. In addition, only 41 percent of workers report having attempted to calculate how much savings they would need to live comfortably in retirement. A 401(k) plan is a tool that you can offer your employees to help them prepare for retirement so they can retire successfully when they are ready.
- Attract and retain talent
- Employees consider a retirement plan a vital factor in their job selection process. “According to a recent Glassdoor Employment Confidence survey, a retirement plan is one of the most valued benefits an employer could provide their employees.” Offering employees the ability to participate in a retirement plan is an important part of a competitive benefits package that will help attract and retain top talent for your company.
- Save on small business taxes
- Businesses can deduct plan expenses as well as employer contributions to employee retirement accounts. Companies with fewer than 100 employees can qualify for a tax credit of $500 a year for three years to cover up to 50% of the costs of a 401(k) plan. For example, an 11-employee company using Guideline could reduce their total annual cost from $1056 to $556. Learn more here.
- Reward employees with tax-deferred employer contributions
- Employers can choose to make a profit sharing contribution, also known as a nonelective contribution, to employee accounts after year-end once you have a better idea of your company’s performance. This contribution can be deducted on your business’s prior-year tax return. Further, these contributions are not taxable to your employees until they withdraw the money, and are not subject to social security or medicare tax. For many employers, the combination of a prior-year business deduction and the tax advantages make this an ideal way to provide year-end bonus compensation to employees. Learn more here. Employers can also choose to match employee contributions, which have similar tax advantages.
- Business owners, partners, and managers can save too
- 401(k) plans are available to all employees, as well as partners and owners who are active in the business. By making a 401(k) available to your employees, you are increasing your own options for retirement savings. Learn more here.
- Setting up a plan is easier and more cost-effective than ever
- By partnering with a 401(k) service provider like Guideline, small businesses are no longer subject to high management and administrative fees commonplace with large 401(k) providers. With a Guideline 401(k), companies are able to significantly reduce both employer fees and employee expenses.
A low-cost 401(k) plan, such as those offered by Guideline, provides your firm with a cost-effective method to attract and retain talent, save on taxes, and provide peace of mind for your organization. Visit our website for more information, as well as to set up a demonstration of our product!