There are a lot of good reasons to help employees secure their financial future. For one, many employees value benefits over salary these days. One recent survey from the American Institute of CPAs found that around 80% of workers feel this way. So offering an employee benefits package that includes a retirement plan can provide much of the value employees are looking for.
At the same time, caring about your employees’ financial future can give a real boost to morale. More than eight in 10 employers say that financial wellness programs increase employee productivity, engagement, satisfaction, and loyalty.
But while this is all well and good, some small businesses may worry that they’re too small to help employees prepare for retirement, or that state mandates for retirement plans will create too much of an administrative or financial burden. If that’s the case with your business, here’s a closer look at how retirement planning can be positive for everyone, helping employees and employers alike.
How retirement planning helps employees
Your employees have a lot on their plate outside of work. They may be raising families, caring for elderly parents, paying off student debt, or buying homes. All of this takes money. If in the midst of financing their everyday lives they aren’t able to save for retirement, too, or don’t know the best ways to save, their financial future can look pretty uncertain — even bleak.
Having access to an employer-sponsored retirement plan gives employees:
- Peace of mind. A retirement plan is a tangible account that employees can review and contribute to. They see what they’re putting away each month along with what you, as their employer, are contributing, and can track their own progress. Instead of worrying about being able to save at all, they have a managed mechanism for saving that helps them build confidence in their future.
- Improved morale. As mentioned above, knowing that you care about their financial situation strengthens your employees’ connection to the business. The relationship is reciprocal: when the business shows concern for them, employees show concern for the business by wanting to do a good job and feeling a greater sense of loyalty to the business.
- Financial education. Retirement planning opens the door to financial literacy, especially if a plan offers some degree of educational support or guidance. Employees can learn about their optimal retirement goals and take control of their overall financial health.
How retirement planning helps employers
Because people increasingly look to the benefits an employer offers to determine if they’ll take a job offer or stay with a job long term, a retirement solution can make your business more attractive and competitive. In fact, 94% of small business owners who offer 401(k) plans say these plans drive both employee recruitment and retention.
Encouraging employees to save for retirement also offers many tax advantages to your business. For example, when you set up a retirement plan, your contributions as the employer are deductible from the business’s income, and employee contributions aren’t taxed until they’re distributed to the employee. As a small employer, you can also earn a tax credit for 50% of the costs of starting a simplified employee pension (SEP), a SIMPLE IRA plan, or another qualifying retirement plan — capped at $500 per year for each of the first three years the plan is in place.
For more information on how retirement plans offer tax advantages, read more from the U.S. Department of Labor (DOL) here.
Finally, having a retirement plan for employees is now mandated in certain states, so getting out in front of state laws ensures that your business is in compliance — always a good thing. You can either automatically enroll employees in a state-sponsored retirement plan or choose a private qualifying plan such as a defined contribution plan or a defined benefit plan. And even if you’re located in a state where there are no mandates yet for retirement plans, this could easily change down the road. You can start researching your options now and determine the best course of action if and when the laws change.
Retirement planning made simpler
Retirement planning doesn’t have to be an added administrative burden. With the right retirement services solution, you can get help with plan selection and setup and integrate your choice with payroll so that required deduction amounts and 401(k) contributions are automated through the payroll process. Integration with payroll also means you can streamline other important processes like employee onboarding and offboarding, sync key, and up-to-date employee information with plan administration.
As more states mandate retirement plans, you can get started easily with a simplified process that makes the adjustment less challenging overall and gets your business well on its way to securing your employees’ financial future.
Enhance your benefits offering with PrimePay.
PrimePay has a passion for retirement plans. We’re here to support small businesses by giving you the flexibility you need to offer retirement benefits to your employees.
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