Start a Plan
The Time is Now
The past few years have created challenges and a new environment we have never seen before. There has never been a more important time to evaluate your companies’ offerings for benefits. The cookie cutter benefit package is not the answer for small businesses anymore. Customizing your benefits tailored to your workforce is the new wave of offerings to the new normal. Having a competitive retirement package can boast many additional offerings on both the company level and with your employees. Modernize your 401k Solution.
Why start a small business 401(k) in 2022?
1. TAX CREDITS
SECURE Act, passed in late 2019, increased tax credits available to small businesses who are starting a 401(k) plan to $5,000 per year* (up from $500) for the first three years the plan is in place to help offset administrative costs—up to a total of $15,000 over the course of three years. Credits can be used to cover up to 50 percent of eligible expenses, including setup and administrative fees, as well as other costs associated with starting the plan. The SECURE Act also included an additional $500 tax credit per year for up to three years for new plans that include automatic enrollment (totaling up to $1,500).
Interested in learning more? We’ve broken down some of the top tax benefits of 401(k) plans for small businesses here: Tax Credits for Startup Plans
2. TAX DEDUCTIONS
As a 401(k) plan sponsor, you are not required to match employee contributions, but many 401(k) plan sponsors do decide to offer a matching agreement as a benefit to employees. Any matching contributions made by the employer are tax-deductible, and employers have a variety of contribution options to choose from, including a dollar-for-dollar match, a partial match, and profit sharing options as well.
3. EMPLOYEE PRODUCTIVITY, RETENTION, AND ACQUISITION
The benefits package you offer may make or break your company when it comes to hiring and retaining employees, so another reason to seriously consider establishing a 401(k) plan for your small business this year is employee attraction and retention. Offering a retirement savings plan can help small- to mid-size businesses stand apart from other options—which may make applicants more likely to accept a job offer and current employees less likely to look elsewhere.
In fact, MetLife found in its 2021 study on employee benefits that financial health is the top concern among employees today and is also a top contributor to poor mental health—which frequently causes decreased employee productivity . Even further, the study revealed that the top two financial concerns among workers are directly related to their future retirement:
- 48% are concerned about their ability to retire as planned or on schedule
- 48% are concerned about long-term savings such as 401(k) accounts, IRAs, or other retirement savings vehicles
Offering a retirement savings vehicle for current and future employees to save in could go a long way in easing their financial anxieties—which, in turn, may make them more productive and boost your bottom line.
4. EASY TO MANAGE
Many small business owners are often unsure if they have the time or capacity to run a 401(k) plan along with everything else they do, but luckily, there are 401(k) providers out there that specialize in helping small employers run their plan. Whether you have one employee or 100, there are 401(k) plan options available to fit your company’s needs and goals. Some providers even build fiduciary protections into their services to help take the legal responsibilities and fiduciary liabilities associated with running the plan off your shoulders.
Plus, there are 401(k) providers out there who can help you streamline your benefits processes by integrating with your payroll provider — saving you time and money, reducing errors, minimizing your administrative tasks, and making timely investment of employee 401(k) contributions on your behalf.
Read more about 401(k) Payroll Integration.
5. OWNERS OF A SMALL BUSINESS NEED RETIREMENT SAVINGS TOO
As a small business owner, you need to be able to set aside some retirement savings too—and one of the best ways to do that is in a tax-advantaged account like a 401(k) plan. Not only do 401(k) plans have a higher contribution limit than other retirement plan options, like IRA and SIMPLE IRA, but they’re also flexible enough to fit with your company’s needs and goals. Have a high number of Highly Compensated Employees (HCEs) at your business, for example? Many 401(k) plans also offer Safe Harbor options to help small businesses pass non-discrimination testing; you’ll just want to make sure the plan is in place prior to Safe Harbor deadlines for the year.
There are plenty of reasons to consider starting a 401(k) plan for your small business this year; learn more about Why a 401k plan may make the most sense for your company or check out our resource library for employers.
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