A 401k plan is an employer-sponsored retirement plan into which an employee may contribute a portion of their salary before paying taxes. Retirement plans are now among the most desired benefits for employees. In fact, 62% of candidates surveyed by Accenture said that they are more likely to accept a job offer if a company provides a 401k plan. Despite the popularity of this benefit, some smaller companies dread the setup and administrative costs of offering a 401k plan.
Before dismissing this benefit altogether, consider the following advantages your organization will reap when offering a 401k retirement plan.
Business owners partnered with Tandem HR for PEO services do not incur 401k administrative costs including expensive audits.
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If you have 100 or fewer employees, you may be able to claim 50% of eligible startup costs of a 401k. Additionally, organizations enjoy a tax credit of up to $5,000 each year for the first three years under the SECURE (Setting Every Community Up for Retirement Enhancement) Act.
While you’re not required to match employee contributions, you can deduct up to a certain amount of your contributions on the company’s federal income tax return. Many companies match 50 cents on the dollar contributed by employees with some limitations set.
Attract and retain talent
As mentioned earlier, retirement plans are one of the most sought-after benefits by job seekers. Including 401k in your benefits package allows you to remain competitive in attracting the best talent to your company. This is especially important in today’s talent market. Additionally, offering retirement options shows you care that your employees develop a secure financial future and will assist with retention.
Financial wellbeing is a very hot topic right now. Extending resources to educate employees on intelligent decisions to secure a stable financial future offers employees security. Don’t underestimate this sense of security, either. It reduces stress, boosts morale, and affords employees more mental capacity to invest in their work. This translates to increased productivity and a positive impression of your organization.
If you’re looking for ways to boost productivity or incent employees to reach goals, look no further. You may offer non-matching or profit-sharing contributions to reward employees for their performance. You can make these contributions toward an employee’s retirement plan regardless of whether or not they contribute to one. The best part? You still receive the same tax benefits mentioned above.
Your organization will only enjoy these four benefits of offering a 401k plan if you have employee participation. So, when offering retirement benefits, you must effectively communicate the benefits to your eligible employees. Remember to include them in your benefits orientations and enrollment periods. You can also remind employees of this benefit in your handbook or intranet.
A 401k retirement plan is a substantial offering that benefits employers and employees when utilized and adequately communicated. Not only are there tax benefits for you and your employees, but you can drive productivity and retention—two key drivers to business success.