But my business is too small to offer a 401(k) plan…

In spite of the widely held belief that certain businesses are simply too small to offer a workplace 401(k) plan, the reality is there are no size restrictions on 401(k) plan eligibility. Essentially if an employer intends to offer a retirement plan to their employees at some point or wants to contribute to their personal retirement future – they’re not too small for a 401(k) plan. 

In fact, small businesses without a retirement plan could be denying themselves and their employees important advantages.

401(k) Advantages for Plan Sponsors

For plan sponsors, offering a 401(k) plan is beneficial on several levels:

  • Employee recruitment and retention. As talent pools become increasingly specialized and employers compete for prospects with requisite skills and experience, including a retirement plan in the benefits package attracts qualified employees who seek to hold a position for an extended time period.
  • Tax benefits. Any money employers contribute toward a 401(k) plan – like plan costs, match/profit sharing amounts, financial advisor fees and educational expenses – are completely tax deductible. Plus, employers initiating a 401(k) plan may be able to claim a tax credit for some of the cost of starting the plan.  The credit is 50% of the startup costs up to $500 for the first three years of the plan.
  • Retirement success. Employers offering a 401(k) plan are partners in helping their employees get to a place where they can, first, put money away for retirement and, in the long term, retire with confidence.

401(k) Advantages for Plan Participants

The best and most obvious way plan participants benefit from having access to a 401(k) plan is that they can actively put away money for retirement. On top of that, plan participants can leverage pre-tax contributions to realize tax savings.

While these “pros” make a strong case for offering and participating in a 401(k) plan, it’s important to objectively evaluate the needs of both plan sponsors and plan participants to determine the retirement vehicle that is the best fit for the company. A consultation with a financial professional is a great first step in finding the right plan to meet plan sponsor goals and needs, and support the best interests of plan participants. 

In some instances, a 401(k) plan like CoPilot is the solution. It provides tools to help plan participants easily translate their retirement savings from account balances to years of retirement and make confident retirement decisions because investments are proactively monitored through a fiduciary. To find out more about 401(k) plans and what CoPilot might offer you, contact us online or give us a call at 800.236.7400. 

Get the facts about small business retirement plans in Overcoming Retirement Plan Objections. Click the button below to download your free copy.