The establishment of a 401(k) plan is one of the most important steps an employer can take to benefit their business, their own retirement, and that of their employees. Tax and other financial benefits accrue to the business, as well.
A Must-Have to Attract and Retain Talent
The most recent annual Metlife employee benefit trends study found that 72% of employees consider a 401(k) or other retirement plan a “must-have” benefit, ranking second only behind health insurance coverage. In the current full employment market, offering that benefit helps small business employers level the playing field in attracting and retaining the best talent. And with the high cost of employee turnover, a 401(k) plan offers an affordable benefit to help keep employees on board.
Helps the Employer Plan
Business owners focused on running and growing a successful business may not take the time to establish a plan to help themselves prepare for retirement. It’s critical to address their own retirement early on, so when it comes time to spend a little more time on the golf course or with the grandkids, they’re not reliant solely on the proceeds from the sale of the business. By planning ahead, they can get started accumulated assets to supplement retirement income.
Employer-owners considering offering a retirement plan should be aware of the tax credit available for businesses offering a plan for the first time. The Startup Cost Tax Credit is available for the first three years of the plan, including 50% of ordinary and necessary eligible startup costs, up to a maximum of $500 per year. The credit helps offset the cost of setup and administrative fees for the plan on a dollar-for-dollar basis. (Note that expenses included in determining the tax credit are not also deductible in the calculation of taxable income.)Employer contributions to the plan, such as an employee match or a safe-harbor plan match, are tax deductible as a business expense, as well.Integration Leverages Time, Saves Money and Improves Accuracy
So, given the importance of saving for retirement, the financial benefit to the company and its importance as part of a solid benefits package, why is a payroll-integrated solution the right option? Simply put, small business owners will benefit from a cost effective solution that saves time, resources and keeps them in compliance, as well.
With a typical 401(k) plan, there are dozens of tasks the company and their plan provider must complete each pay period, with the vast majority of the effort falling on the employer. Entering new hires, determining eligibility, handling enrollment and processing contributions are just some of the tasks that must be handled correctly each pay period.
A 360 degree payroll-integrated solution significantly reduces the number of recurring employer-handled administrative tasks. There’s no need to pull data from the payroll side and enter it in on the 401(k) side. With an automated process, data is securely shared between systems. Redundant, manual data entry is eliminated, increasing data accuracy. Errors are reduced or eliminated, and importantly, plan investments are made on time.
Stepping out from the middle of payroll-to-401(k) plan processes and into an integrated plan enables the employer and their team to save valuable time and money, reduce hassle, stay compliant and get back to what they do best: grow their business.
To find out more about the benefits of payroll-integrated retirement plans, including those offered through Corporate Payroll Services and PAi, check out this video.