By: Jeremy Skoglund, VP Trust Officer
I mentioned some benefits that an employee receives from participating in a 401(k) plan in an earlier post: 401(k), 403(b), 457(b). If you’re a business owner, though, you may have a hard time justifying what appears to be an expensive employee benefit when you consider offering a 401(k) to your employees. There are expenses to have the Plan set up and managed. Employees may expect you to match a portion of what they contribute to the Plan. You know you almost have to offer this retirement savings benefit to keep your employees, but you already provide other benefits like insurance, vacation time and free goodies in the breakroom. Oh, and you happen to pay your employees too. All these things cost money, so why would you want to offer another benefit?
Whether you have a large or small business, here are a few of the benefits that your business gets from offering a 401(k) plan to your employees:
1. Retaining Employees
The most significant advantage you probably already know about. Many companies are offering retirement plans such as a 401(k). If you do not, you risk the chance of losing your employees to someone else. Beyond the issue of losing quality employees, it will likely cost you much more to lose an employee than the cost of a 401(k). There’s the time and expense of recruiting and interviewing to find another employee. When you finally do hire a replacement, you have the time and cost of training that person.
2. Tax Deductions
If you read our previous post, you know that employees can reduce their taxable income by contributing to a 401(k) plan. But did you know that your business also can benefit from matching employee contributions? Those matching dollars are tax deductible to the employer.
3. Better Retirement Planning Option for You
Maybe your plan for retirement is to sell your business. This may or may not work out. Like investing, when it comes to our future, it is always best to diversify. Putting some funds away for the future in various products and not just relying on the potential future funds you may get when you sell is the best approach. And when you offer a 401(k) plan to your employees you also just created another retirement option for yourself.
If you would like to understand more about the benefits of offering a 401(k) at your company and how you would go about setting up a plan, let us answer your questions by calling (701) 857-7150.