Every company wants the best for its employees. So, should you offer a 401K plan to your employees?
Well, what is a 401k plan?
It is a retirement savings plan provided by employers to their employees. It allows them to save a portion of their earnings before taxes. The plan offers financial benefits to everyone in the company, including the business owner. This inclusivity makes it a highly sought service by most employees.
Well, those objecting the plan says it’s too expensive, or that it requires too much administrative work. At times, the employees may not want to take part in the process.
As an entrepreneur, you may be torn between offering the plan to your employees or not. In this guide, we will demonstrate how small businesses can obtain a quality plan.
Here are the primary reasons why you should offer a 401k.
1. Happy Employees Translates to Higher Profits
Statistic studies show that happy employees contribute to higher earnings and profits. For instance, in 2014, revenues for companies offering the plan grew by 22.2 percent.
As you know, many workers check the retirement plans before deciding whether they’ll work. Offering the plan increases job satisfaction, increases profitability, attract better talent, and reduces employee turnover. All this helps your business to grow.
2. Using Technology Makes the Process Easier
Yes, 401k plans require a lot of administrative work. However, several technological tools make administrative work easy and quick.
Take your time to check the best tool to manage the exercise. Alternatively, you can outsource the administrative management roles to a financial services company.
3. Never Overlook the Tax Advantage
Any money you earn from the investment is free from taxation till retirement. When you take your money out from the investment, you’ll pay an income tax which is more favorable than capital gains.
Now, you’ve seen the advantages, how do you implement the best 401k plans for small business?
· Outsourced Administration
Hiring an in-house expert is quite expensive. However, leaving the exercise to inexperienced people could lead to several mistakes making the process inefficient. So, how do you solve the dilemma?
Outsourcing allows you to hire competent professionals leading to administrative efficiency at low costs. There are so many professional employer organizations (PEO) that handle payroll, human resources, and 401k plans for small businesses. Thousands of small business owners partner with PEO’s to get access to the competitive benefits of 401k plans.
Well, selecting the best PEO to work with can be challenging. However, some firms make sense for your business needs. Such PEOs will have minimum requirements for coverage, accreditation, and great features like short term contracts.
· Offer Good Investment Options
Ensure your firm offers a wide range of investment options for your employees to pick from. The mutual fund options should have different options like bonds, U.S stocks, and international stocks.
As a rule of thumb, 75 percent of your mutual funds should have an expense ratio of less than 1 percent. Also, track the performance of your funds in the plan. Also, make sure that employees are happy with the options which you provide.
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