5 simple reasons why businesses should offer a retirement plan

You’ve probably seen the TV ads with the big red “Easy” button. Here’s a hint: it’s the ad for an office supply chain with a name that rhymes with maples. If only you could take that red button and put it in front of all business owners who don’t have retirement plans for their companies. “Just hit the button,” you would say. And shazam! They’d have their retirement plans. Okay, establishing a retirement plan isn’t THAT easy, but it’s close. Education is crucial to showing business owners how truly beneficial, and of course, easy, an employee retirement plan is.

1. It attracts and keeps employees.
A 2013 Wall Street Journal study showed that retirement benefits are the third most important factor driving employee loyalty in businesses [1]. By offering these benefits, business owners create an enticing and powerful incentive. Take it one step further by offering a company match, and the scales could be tipped even further! Offering a retirement savings plan also shows that business owners really care about their employees. And that speaks volumes. Word will get around, and the owner and the company will be better off for it.

2. It’s affordable.
Many business owners think a 401(k) retirement savings plan is cost-prohibitive, or very expensive at the very least. On the contrary, a 401(k) plan is one of the lowest cost, highest benefits an employer can offer. There are also multiple tax benefits a company can receive by offering a 401(k). If a business is establishing a plan for the first time, it can receive a three-year tax credit for 50% of the startup cost, up to $500 per year. This tax credit can offset setup and administrative fees of the plan. In addition, if an employer makes contributions to the plan, they can deduct it on the company’s federal income tax return.

3. Minimal time and attention is required.
Business owners want to concentrate on their businesses, not manage a retirement savings plan.  Working with a service provider that has the expertise and offers plan management tools can go a long way to reduce the business owner’s oversight burden.  If you choose a solution like PAi’s CoPilot, education and account setup is intuitive and quick and businesses have less worry when it comes to fiduciary responsibilities surrounding investments. 

4. Flexible 401(k) plans fit the culture and goals of the company.
Flexible plan options give business owners more opportunities to align a retirement savings plan with company core values and culture. Employers can enforce eligibility restrictions, select a vesting schedule and offer matching contributions. Plans can allow profit sharing, automatic enrollment features and participants to take out loans against their 401(k) savings. Participants can invest in their retirement through convenient salary deferrals that are generally not taxed until funds are distributed.

5. 401(k) plans contribute to the economy.
When business owners provide their employees with some of the tools necessary to retire comfortably, such as a retirement savings plan, they contribute to building a healthy economy – and a society of people with more disposable income [2].

The hardest part of a retirement savings plan for business owners is understanding how easy a retirement savings plan can be. With programs like PAi’s CoPilot, businesses have affordable options that can align with your business goals. Investments are monitored for performance, 3(38) services are provided by eRIA to minimize the investment liability on the employer, and participants receive real-time messaging whenever an event occurs that may impact the health of their retirement. CoPilot is changing retirement outcomes by changing the conversation. Contact us online or give us a call at 800.236.7400.


[1] Passey, C. (Sept. 30, 2013). Why Small Firms Should Consider Setting Up 401(k)s. The Wall Street Journal.

[2] www.intuit.com (n. d.). Retrieved from:  http://quickbooks.intuit.com/r/employees/6-reasons-your-small-business-should-offer-a-401k-plan/

Paul Novitski, CPFA - Financial Services Representative – panovitski@pai.com - 800-236-7400 x3340

Paul is a subject matter expert on 401(k), retirement savings, participant advice, small business 401(k), investments, education on options.