The 401 (K) plan is the most widely implemented employer-sponsored retirement fund in the United States, with many companies viewing the plan as an essential aspect of their benefits package.
The traditional 401 (K) plan involves the employee agreeing to have a percentage of each paycheck deposited directly into an investment account. Their employer can choose to match part of that contribution or even all of it. The employee selects from an array of investment options, typically mutual funds.
The two basic types of 401 (K) options are traditional and Roth. In the case of traditional 401 (K) plans, the employee’s contribution to their fund is pre-tax, with their eventual withdrawals subject to tax at the current rate. Contributions to a Roth account are made with after-tax income, with the ensuing retirement withdrawals being tax-free.
401 (K) Plans Are Essential To Employee Retention
Unlike certain other benefits, companies have no legal obligation to offer 401 (K) plans to their employees. Recent data shows that approximately 57 million Americans work for companies that fail to provide any type of retirement savings option.
With this in mind, 401 (K) plans are one of the most straightforward and effective ways of differentiating yourself as an employer in today’s competitive job marketplace.
A substantial benefits package including a 401 (K) plan option will help your business appeal to a broader range of job-seekers and aid in the retention of your existing workforce.
401 (K) Plans Promote Equity and Inclusion
Recent studies have indicated that education level influences who have access to a retirement plan. According to the AARP, 76% of employees who don’t have a high school degree are also without an employer-sponsored retirement savings plan. The disparity is striking when compared with the data that 50% of college-educated workers have access to such benefits.
By enabling access to retirement plans for your entire team, you promote long-term financial planning for all, regardless of educational background.
401 (K) Plans Are a Powerful Incentive
As an organization, you may choose to reward employees for exceptional performance by making increased contributions to their 401 (K) funds.
Rewards for outstanding work are always a morale boost, and employers who feel that their organization is actively helping them prepare for the future are likelier to remain in their position long-term.
401 (K) Plans Are Challenging
401 (K) plans can offer substantial tax benefits to your organization. Employer contributions are tax-deductible provided they do not exceed certain limits, and tax credits can be applied depending on the size of the business.
It is essential to seek the advice of an expert when deciding which 401 (K) benefits provider is most suitable for your business. Employee Retention Benefits Inc (ERB) serves Riverside CA and greater Los Angeles County. We pride ourselves on being an all-encompassing employee retention service, advising on benefits packages, payroll systems, and more.
