In Small Business

Many small businesses are struggling to decide what benefits they should offer their employees. Too often business owners feel that they can’t afford benefits or that the pros of offering a 401(k) plan don’t outweigh the cons. In my experience, though, those feelings are rarely accurate. When set up strategically, 401(k)s can provide small businesses with an advantage.

There are many major benefits to offering your employees a 401(k). In this article, I’ll go through the top five.

1. 401(k)s Provide Incentive for Employee Acquisition

The Seattle job market is tough—for employers, that is. As of July 2019, the unemployment rate was 3.2 percent, a small rise from May’s low of 2.9 percent. With such a low unemployment rate, competition for the best talent is fierce. If you’re hiring in this market, you need to do all you can to beat the competition.

Offering great benefits is just one incentive you can provide potential employees. A 401(k) has great benefits for your employees. They can save for the future – especially if you use an employer-match plan, under which you’ll be able to help employees save even more. Seattle is not an inexpensive place to live, let alone retire. With a 401(k) plan, you’re encouraging potential employees to look at a job with your company as a long-term career.

Even if you don’t choose to contribute to your employees’ 401(k)s, the plan itself offers them the benefit of a pre-tax portion of their salary going into their 401(k) account.

2. 401(k)s Boost Office Morale

Has the mood around the office struggled lately? Don’t brush it off; unhappy and disengaged employees cost the US economy $450 billion to $550 billion per year. Keeping office morale high is crucial to the success of your business.

Offering a small business 401(k) is a great way to boost morale in your office.

A 401(k) plan, especially one where you contribute, shows your employees that you don’t care solely about having them in the right positions to make your company money; you also care about their future. With a 401(k), you’re setting up your employees for a healthy, happy retirement. In the US today, only 55 percent of baby boomers have enough saved for retirement. This is a generation with ages that range between 55 and 75 years old. The youngest should be ready to retire in just five years, and the majority should be enjoying their retirement.

3. 401(k)s Allow Businesses to Take Advantage of Tax Deductions

Did you know that you can claim tax deductions on your small business 401(k) plan? Every contribution that you make toward your employees 401(k)s can be claimed as a deduction on your taxes. If you have at least one employee and you start the first 401(k) for your business, you can receive a $500 tax credit each year for the first three years of your business.

Don’t forget that you’re an employee of your business as well. You can count business contributions made toward your own 401(k) as a deduction on your taxes. Matching your employees’ contributions offers you the benefit of matching your own 401(k) contributions as well.

4. 401(k)s Wisely Prioritize the Future

Retirement is starting later and later. Our state actually has one of the older retirement ages in the US; the average Washingtonian retires at the age of 64. While this is only two years later than the national average of 62, it can make a big difference. When you’re planning to enjoy your golden years, every year counts.

401(k)s help participants to plan for and prioritize their futures, minimizing the likelihood that they’ll be forced to work past their ideal retirement dates.

On the business end, too, 401(k)s show a focus on future goals over short-term profit. While there are upfront costs to offering 401(k)s, factors like employee satisfaction and retention offset those over the long-term. Prioritizing the future is, as any wise person will tell you, an approach that’s more likely to lead to long-term success.

Offering a small business 401(k) plan shows that you’re prioritizing the future of your employees, your company, and yourself.

5. Offering a 401(k) is Easier Than Ever

New legislation is also coming down the line that makes it easier and more affordable for your business to offer a small business 401(k). At the end of July 2019, the Labor Department released a final rule that allows several small businesses to band together to collectively offer these plans. The rule will take effect on September 30th and allows for small business collaboration even if the companies are far apart, as long as they’re in the same industry.

Another way to make 401(k) management easy is to outsource it to a reputable company. Outsourcing your 401(k) plan makes offering benefits to your employees easier than ever before. By outsourcing the financial management of the plan, you won’t have to worry about setting up a new plan, adding new employees to the plan, or managing contributions and matching. Instead, you and your employees reap all the benefits of a small business 401(k) with none of the hassle.

The bottom line is that these plans make sense for the vast majority of small businesses. At Sapling Wealth Management, we’re honored to empower small businesses with 401(k)s that best meet their needs. Contact us today to talk about your business’s 401(k) plan.

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