As the unemployment rate has dropped, hiring has grown increasingly competitive, especially for businesses with highly-specialized positions. If you act as a 3(21) fiduciary, it’s important to understand how 401(k) matches factor into the hiring process and how they financially benefit the whole company. Here are a few reasons why offering a 401(k) match helps your business.
If you don’t offer a 401(k) match, chances are your competitors do, meaning it’s more difficult to attract top talent. A full benefits package that includes a 401(k) match may prevent you from paying top dollar to win candidates who might consider a job offer from your competitors.
In order to reap the largest rewards attached to a 401(k) match, employees often must work for a particular period of time, known as vesting. This timeframe encourages employees to stay and maximize their contributions to receive the best benefits. Since replacing a departing worker is expensive, reduced turnover brings cost savings.
Your finance department will love the savings received at tax time from your 401(k) match. Businesses can deduct every dollar they contribute toward employee 401(k) plans, in addition to the tax savings employees reap for participating. Small and mid-sized business may also be able to deduct their 401(k) startup costs under the Credit for Small Employment Pension Plans Startup Costs.
In most states, businesses aren’t required to offer retirement plans for their employees, but that is changing. Seven states now have a government-mandated retirement option in place for residents, and in Oregon and Illinois, employers are required to enroll their workers in a plan. By having an employer-matched 401(k) in place, your business will be prepared if a mandate impacts your workplace.
A 321 fiduciary often serves as an advisor to business leaders as they make decisions on employee benefits. By understanding the benefits of 401(k) contribution matching, your business can make informed decisions and potentially save money.