Many small business employers are reluctant to provide 401(k) plans for their employees because they don’t realize how easy it is to set up plans and maintain them. Indeed, the Small Business Administration found that a majority of employees working for small businesses didn’t even have access to an employer-sponsored plan. When you don’t offer a retirement plan, you could miss out on recruiting talented workers, and miss out on some of the associated tax benefits.
Before you decided that it is not possible for you to offer a 401(k) plan to your employees, consider that you might be falling prey to some misconceptions. Chad Parks is the CEO and founder of The Online 401(k), and he offers information on 4 common misconceptions associated with offering these retirement plans — and the truth about them:
- Matching is a must: While it’s a nice employee perk, it’s ultimately the employer’s choice to match contributions. Either way, employees still have the chance to save up to $16,500 tax-advantaged annually. That’s much more than they could save if they had to open their own IRAs.
- Costs are too high: In fact, businesses can offer a plan for less than what they pay monthly to fill the water cooler! Employers should search for all-inclusive flat fee plans with low cost investment options, which can be found for as little as $95 per month.
- It’s time consuming: A retirement plan can implemented in less than a week and should take no more than an hour monthly to maintain. Employers can also do everything in a web-based environment for ease of use.
- Investing is not my forte: A 401(k) provider can take on the responsibility to select and monitor investments for the plan. Seek a neutral third-party investment advisor to choose appropriate low-cost options.
Providing Benefits
In some cases, workers would rather have better benefits than a raise. Benefits can translate into value that isn’t measured only in money. This is especially true if you can’t provide health care benefits to your workers. At the very least, providing access to a good retirement plan would be beneficial to them — and to your business.
Other perks and benefits can also be considered. Even if you don’t feel that you can offer retirement benefits, or health care benefits, you can try to offer perks like flexible vacation time and perks like a special membership to the local gym. For many employees, this type of value-added employment is likely to help them remain happier and more productive in their jobs, even if you can’t give them a raise every year.
No matter the “extras” you provide, these types of programs can be beneficial and attractive to workers. Carefully consider the benefits you might be able to offer in the interest of attracting the most talented employees to your company.
Miranda is freelance journalist. She specializes in topics related to money, especially personal finance, small business, and investing. You can read more of my writing at Planting Money Seeds.