A 401k plan is an employer-sponsored retirement plan into which employees can contribute a percentage of their salary before taxes. Employee perks such as retirement plans are currently among the most sought after. Moreover, 62 % of candidates questioned by Accenture stated that they are more inclined to accept a job offer, if a firm offers a 401k plan. Despite its popularity, several smaller businesses are wary of the setup and administrative costs of providing a 401k plan.
Consider the following advantages your company will receive from offering a 401k retirement plan before discarding it completely.
1. Tax benefits
If your company has 100 or fewer employees, you may be allowed to deduct 50% of qualified 401k starting costs. In addition, the SECURE (Setting Every Community Up for Retirement Enhancement) Act provides a tax credit of up to $5,000 per year for the first three years.
While you are not compelled to match employee contributions, you can deduct up to a specific amount on your company’s federal income tax return. Many employers match employee contributions up to 50 cents on the dollar, subject to certain restrictions.
2. Attract and retain talent
As previously said, one of the most sought-after advantages by job candidates is retirement plans. By including a 401(k) plan in your benefits package, you can keep your firm competitive in hiring top workers. In today’s talent market, this is very vital. Additionally, providing retirement choices demonstrates that you care about your employees’ financial security and will help with retention.
3. Offers security
Currently, financial well-being is a trendy issue. Extending resources to educate employees on how to make informed decisions in order to achieve a safe financial future provides employees with a sense of security. This sense of safety should also not be overlooked. It lowers stress, raises morale, and gives people greater mental capacity to devote to their jobs. This equates to higher productivity and a favorable image of your company.
4. Provides incentives
If you’re seeking for techniques to increase productivity or motivate personnel to achieve their objectives, then look no further. You might provide employees non-matching or profit-sharing contributions as a way to thank them for their hard work. Regardless of whether or not an employee contributes to a retirement plan, you can make these contributions. What’s the best part? The above-mentioned tax advantages are still available to you.
These four advantages of having a 401k plan are only available to your company if you have employee involvement. As a result, you must properly convey the benefits to your qualified employees when delivering retirement benefits. Keep them in mind throughout benefit orientations and enrollment periods. In your employee handbook or intranet, you may also remind them about this perk.
SW HR Consulting has been helping companies to build their teams and values for over 10 years. Contact us to find out more about our unique hr outsourcing services and see how our expertise can benefit you.