Why offer a 401(k) plan? - Retirement Planning for your Business
A 401(k) plan is more than just an employee benefit, but an economic security tool for your business. When
employees are equipped with the tools they need to retire in comfort they in turn have disposable income and
are far more likely to not only spend it in the local economy, but also be happier in their workplace
without the added stress of thinking about retirement and thus be more productive.
Recent polls have found that in over 70% of small companies, employees were not offered a 401(k) plan. Why
such a low number? There are perceptions that the plans are hard to administer and costly to start. Some
companies may not feel that they, or their employees, would see a large benefit because those who are
offered would not want to participate in such a plan.
Why offer a retirement plan? Here are a few reasons for businesses to consider.
Some of the most obvious reasons to offer a 401(k) plan is to not only retain employees, but also attract
talent. A 2012 MetLife study has found that retirement benefits are a significant factor in employee loyalty
after their salary, and other perks such as health care coverage. With the job market tight for highly
skilled workers, having a retirement plan in place is a great way to lure new talent to your company. Small
companies should work to provide similar benefits as those offered by larger companies if they want to see
their business grow. Retention of employees and keeping a low turnover rate can not only avoid the extra
cost of training new workers, but help establish a culture of trust and foster relationships with customers
and clients.
Another great benefit of 401(k) plans is that owners can also participate. The plans can also be setup for
companies that are essentially sole proprietorships, which is favored among startups and entrepreneurs.
Commonly, a business owner can put away more money in a 401(k) than an IRA. Small businesses can also get a
credit for the first few years, which can help to make up the difference of establishing the plan and
administration costs.
Setting up a 401(k) plan is not difficult, and taking the time to be proactive in increasing participation
among employees should be considered. The long-term benefits of employee retention and productivity are a
few of the most common reasons to offer a plan. Part of the problem of the 401(k) industry is that people
believe it is too complicated. Finding a Certified Financial Planner (CFP) can not only make finding the
right plan simple and cost effective, but is an important step to finding the right retirement solution for
your employees. A CFP can make sure you're getting the plan suited best for your business with the highest
return, and can secure your financial well-being for your company and your employees.