5 Ways Your Small to Midsize Business Could Benefit from a 401(k)

5 Ways Your Small to Midsize Business Could Benefit from a 401(k)

It’s a given that a large company operates differently than a small, growing business. However, many small to midsize business owners don’t realize that some of the benefits big companies offer to their employees are available to them as well, like employer-sponsored retirement plans.

While they’re often incorrectly seen as inaccessible to startups and other growing companies, there are some excellent 401(k) plan options available for smaller businesses. And there are a lot of reasons that small to midsize business owners may want to consider starting a retirement plan, from helping your company stand out with a competitive, differentiated benefit to building a nest egg.

There are a lot of reasons that small to midsize business owners may want to consider starting a retirement plan, from helping your company stand out with a competitive, differentiated benefit to building a nest egg.

Here are just a few ways that a 401(k) plan could enhance your business.

What can a modern 401(k) do for my business?

Differentiate your business

While most companies state that they value their workforce, jobseekers and investors are becoming increasingly wary of empty promises. Offering a comprehensive benefits package can help your business show that it takes a proactive approach to employee value. In addition, by choosing cutting edge investment options that have recently become available in the 401(k), such as cryptocurrency, tech-forward companies can reflect their commitment to modern solutions through their benefits packages. A differentiating benefit may also help your company stand out to investors, and could be a deciding factor for top talent when it’s time to recruit. This is particularly the case for rising talent in fast-growing industries, like blockchain, who may have their pick of positions available to them.

A competitive retirement plan may give employees a reason to stick around, and could help them feel that working for your company is an investment in their own future.

Encourage higher retention rates

Finding talent is just the first step to managing a productive workforce, especially in such an unstable job market. Nearly 55% percent of currently employed Americans say they plan to find a new job within a year, according to a survey by Bankrate. Business owners know that high turnover can negatively impact operations because the costs of onboarding are steep, and the time required to train new employees can harm efficiency. A competitive retirement plan may give employees a reason to stick around, and could help them feel that working for your company is an investment in their own future.

Improve morale and public image

Happy employees who feel valued are more likely to be productive and engaged at work. A study by Oxford University's Saïd Business School found that happy workers are 13% more productive than unhappy ones. Conversely, unhappy employees can decrease efficiency, and could even damage a company’s reputation with poor reviews on job sites and social media. By offering a 401(k), small to midsize business owners can let their employees know they value them and their services enough to invest in them.

Now, owners can claim credits on up to $5,000 per year for the first three years of the plan.

Bring tax advantages

There are a number of tax incentives for businesses who offer retirement benefits. A small to midsize business typically operates on a fraction of the budget that a larger company does, so every strategy to lower taxable assets can have a big impact. Employers who match contributions can deduct these amounts, and the 2019 SECURE Act has raised the amount of tax credits offered to small businesses that start a 401(k) plan. Now, owners can claim credits on up to $5,000 per year for the first three years of the plan. The act also introduced an additional $500 annual tax credit for three years if a plan includes automatic enrollment. These credits can be used to cover up to 50% of plan costs, from setup to administrative fees.

Enable you to retire

While most entrepreneurs certainly love their work, almost everyone wants to retire eventually. And when running a growing business, it can be easy to get bogged down in day-to-day operations and lose sight of long term goals. However, there are laws in place that prohibit owners and highly-compensated employees from contributing more than a certain amount to a company’s plan. Because of this, many owners worry that their businesses aren’t big enough to manage 401(k)s equitably. Safe Harbor 401(k) plans use matching contributions to give small to midsize business owners the chance to contribute to the company’s retirement account without fear of failing regulatory requirements, such as non-discrimination tests. This way, business owners can not only invest in their workforce, but also invest in their own futures.

A growing sector of 401(k) providers is developing retirement solutions that suit small, growing businesses as well.

What are my options?

Many of the largest 401(k) providers don’t offer the features and services that smaller businesses need, like onboarding assistance and plan management. Fortunately, a growing sector of 401(k) providers is developing retirement solutions that suit small, growing businesses as well.

ForUsAll’s 401(k) plans are made with small to midsize businesses in mind. While most large companies have full time employees dedicated to managing retirement plans, ForUsAll’s full-service 401(k) solution includes comprehensive administration so owners can focus on running their business instead. Our newest plan even offers access to alternative investments, such as cryptocurrency.

Have questions about offering your employees an exciting 401(k)? Talk to one of our representatives today.