KEY TAKEAWAYS:
- Only 57% of small businesses (less than 100 workers) offer 401k
- 88% of job seekers consider 401k plans a “must-have” for potential employers
- 62% of workers compare retirement plan options when deciding whether to stay or leave
- 25 different states have proposed state-mandated retirement legislation
Offering 401k plans—especially with employer matching options—can give your business a big boost in many ways, regardless of size. Small business owners often worry that 401k plans are too complicated to administer or not worth the extra burden, but automation and HR software have made all kinds of employee benefits much easier to manage, including 401k administration. If you recognize the importance of your human workforce, then you need to seriously consider offering a 401k for small business as part of your standard benefits package.
What is a 401k retirement plan?
For today’s working-age Americans, Social Security has become precarious for those expecting a livable income after retirement. Everyone needs something more for retirement. For most, that comes from a 401k plan.
A 401k is a long term investment portfolio that allows workers to save for their own retirement. Employers can use 401k payroll integration to automate deductions and matching contributions. Easier 401k administration and tax incentives have made these retirement plans a standard benefit across most industries.
Why don’t more smaller businesses offer a 401k?
Bigger companies are more likely to offer a 401k. According to the U.S. Bureau of Labor Statistics, 401k are available at 91% of companies with at least 500 workers. It’s different at private-sector firms with less than a 100 workers, where only 57% of those smaller businesses offer a 401k.
Like with health insurance and other benefits, many small business owners want to avoid complications (and expenses) that might be unnecessary. Startups that grow and thrive without extra perks and benefits may not realize what they’re missing.Struggling with an unhelpful 401k provider, some business owners might decide to stop offering 401k plans instead of learning how to switch 401k providers.
Netchex’s 401k solution for small businesses
Our integrated 401k solution is built for businesses of all sizes. Netchex’s comprehensive 401k solutions are designed to help you enhance your benefits package and empower your employees’ financial future. Learn more about the mutual benefits they provide both employers and employees, plus how Netchex makes implementation seamless and administration easy.
Benefits of offering a small business 401k plan
Like with any benefit program, business owners have to invest time and money to offer 401k plans to staff. In most cases, the benefits of offering a 401k far outweigh the expense.
Recruit top talent
When searching for a new job, a whopping 88% of participants in a Charles-Schwab survey said that a 401k plan was a “must-have”. That’s nearly as popular as health insurance (a “must have” for 90%) and far more popular than life insurance (in third place, a “must-have” for 46%). Benefits like 401k plans make a big difference when job seekers compare potential employers.
Retain the best employees
Your best workers are making plans for their own future. When deciding whether to accept a new job or remain with their current employer, a majority of workers (62%) seriously consider the availability of a retirement plan. HR staff should help promote internal talent mobility, but providing a 401k is an equally efficient way to boost retention.
Employee morale and motivation
Currently, political polarization and elected officials threaten to cause all kinds of unpredictable changes in the economy and HR departments. When it’s hard to know what might happen with inflation, interest rates, the stock market, and Social Security–employees will appreciate the relatively secure investment of 401k savings.
Increase tax savings
Within federal limits, employers can take advantage of tax deductions on their contributions to 401k plans. Workers also get the perk of being able to invest income before it’s taxed, so the savings look even more impressive. Small businesses may even qualify for additional tax credits to cover administrative fees and employee education costs.
Better financial security
Two out of five Americans don’t have a rainy day fund and would struggle to cover an unexpected expense of $1,000. Retirement costs a lot more than $1,000, but most people fall into the habit of living paycheck to paycheck. Employees with a 401k will know that they’re saving for retirement, even if they struggle to set aside savings in their personal banking accounts.
Compliance
Since 1974, the Employee Retirement Income Security Act (ERISA) has set minimum standards for pension and retirement plans. More recently, about half the states in America have proposed state-mandated retirement legislation. A reputable 401k provider can help your business stay compliant with state and federal regulations.
Company reputation
In cynical times when corporations are abandoning DEI, employers need to find new ways to show their commitment to employee well-being. Matching employee contributions to their 401k can make a real difference for your staff and their families. Generous benefits will affect how employees talk about your company. s not just about Glassdoor reviews–workers talk to friends and post their opinions to social media.
Discover more about Netchex’s small business 401k solution:
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