5 Reasons Small Business Owners Should Offer Retirement Plans. Here’s some good news for small business owners about workplace retirement plans: your employees likely want you to offer one, doing so can make your company more enticing for potential new hires, and bonus — you might even get some tax breaks.
A recent article from money-minded blog WiseBread.com cited five benefits of offering an employer-sponsored retirement plan for small businesses:
- A retirement savings offering may be more valuable to your employees than a pay raise: According to a Glassdoor survey cited by WiseBread, 31% of workers valued a workplace retirement account, such as a 401(k) or pension plan, over a salary increase. From WiseBread: “This makes sense; several studies have shown that workers benefit from automatic paycheck deductions to contribute to a workplace retirement plan.“ For example, recent research from the Employee Benefit Retirement Institute (EBRI) showed that workers who aren’t saving for retirement would be more likely to do so if their employer instituted automatic paycheck deductions between 3% and 6%. The bottom line: offering a retirement plan — and one that features automatic deductions — may help you attract more talent to your small business.
- Not all retirement plans are pricey: It doesn’t have to cost you an arm and a leg to help your employees to save for retirement. There are low-cost options available for small businesses. WiseBread calls out providers such as Captain 401, Employee Fiduciary and Ubiquity. What’s more, hiring a third party provider not only saves you money, it takes some of the responsibility of managing the plan and related responsibilities off your plate so you can focus on the business of running your business.
- Your business may be eligible for a retirement plan tax credit: Your plan set-up and management fees may be tax deductible. From WiseBread: “If your small business employed 100 or fewer individuals who were compensated at least $5,000 in the preceding year, and your business hasn’t offered a workplace retirement plan in the past three years, it may be eligible for the Credit for Small Employer Pension Plan Startup Costs.” Keep in mind, however, that the plan expenses you use toward this credit can’t be claimed as business deductions.
- Your contributions to the plan may be tax-deductible: A 2017 EBRI study found that nearly 73% of workers who aren’t currently saving for retirement would be more likely to do so if they received matching contributions from their employer. The IRS allows employers to deduct any matches they make in the plan, “subject to contribution limits on qualified employee plans (including the employer’s own plan).”
- State-offered retirement plans may be a game-changer: Several states already, or soon will sponsor their own retirement plans, including Oregon, California, and Connecticut. If you operate your small business in a state that sponsors a retirement plan, and your company doesn’t offer one, you’ll have to start enrolling employees in the state plan in May or December 2018 (depending on how many employees you have on the payroll).
Data from the Government Accountability Office (GAO) shows that between 51% and 71% of small business employees don’t have access to a retirement plan. It’s time to change that. Your employees work hard; they should have the option to set aside money for their future at work. By sponsoring a workplace retirement plan, you can show your employees that you appreciate and value their service and that you have their best interests at heart.
The alternative is they may have to eventually sign up for a state-sponsored retirement plan. Wouldn’t you rather foster loyalty among your current employees and have the ability to attract top candidates from the labor pool? As a small business owner, offering a retirement plan benefit is one of the best ways to accomplish these goals. And doing what’s best for your employees can only help your business thrive in the long run. What business owner doesn’t want that?
