• September 12, 2018
2 minutes Read
For small business owners, offering a retirement plan to your employees can seem like a costly, time-consuming process best left for the big boys. In fact, just over half of all small and midsize businesses offer their staff retirement benefits according to a 2017 PEW study, compared to over 80% of firms with 100 or more employees.
However, improved technological innovation, the prevalence of multiemployer plans (MEPs) and tax incentives combine to make it easier for small business owners to reduce this gap. And it should only get easier, as two bills were introduced in Congress in July that would make it simpler for employers to provide retirement plans by modernizing filing requirements and raising contribution limits for plan participants.
Here are some facts and affordable tips to push small business owners to give their employees the retirement plan they deserve:
It’s cool to save
One of the main reasons small businesses trail their bigger counterparts in terms of offering retirement benefits is because they don’t think their employees are interested. Instead, 93% of SBOs said they believe their staff would prefer higher salaries over better retirement benefits, when in reality, four in five workers want benefits or perks more than a pay raise.
Part of this disconnect can be due to a lack of communication between SBOs and their staff. It is vital employers make their staff aware of the benefits available to them whether within their company or externally with other providers. At the same time, this conversation can enlighten entrepreneurs to open a retirement account of their own and not rely on the sale of their business for their savings.
Just as employees aren’t aware of their staff’s desire to start a retirement program, there’s also a misconception among SBOs that such services are too expensive to set up. Thirty-seven percent of small business owners feel this way, despite the multitude of tax advantages associated with retirement plans.
One of these programs is a $500 per year credit to cover costs involving the startup and management of a retirement plan. Another, and by far the biggest win-win for both you and your employees, is that every dollar a company contributes to an employee’s 401(k) plan is tax deductible. Retirement plans can also help SBOs improve their bottom line by limiting costly employment searches. Ninety-four percent of small business owners say offering retirement benefits helps attract and retain quality employees.
Still think it’s too difficult? You may not be alone, and that is why MEPs allow for small businesses to team up and share the costs and administrative duties that come along with running a retirement plan. MEPs often serve as mutually beneficial partnerships, as employers that are not knowledgeable about retirement plans can now partake in one, while those employers that are can save money.
Lastly, when deciding on a 401(k) provider for your small business or MEP, be sure to select the recordkeeper that best fits your firm. There’s a variety that offer affordable and easy to use plans geared for all investor types. For instance, ForUsAll separates itself from other providers by serving as an all-in-one service that oversees administration, compliance and fiduciary tasks, while America’s Best 401(k) is on the affordable end of providers.
It is important small business owners educate themselves on retirement benefits and understand the positive impact they can have throughout an organization. On top of employee satisfaction and tax incentives, a retirement plan offers SBOs a chance to save for later in life as well. And who knows, encouraging your employees to save today could provide them with the resources they need to become entrepreneur’s tomorrow.