Don’t Assume Offering a Small Business 401k Is Impossible

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Retirement Services & Financial Advisors​ - Serving Columbus & Beyond

Submitted by Life, Inc. Retirement Services on February 2nd,2018

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Small business owners often find themselves in a difficult position when it comes to offering employee retirement plans. Lack of information and assumption can cost them the opportunity to give their employees the chance to have a valuable benefit that could end up serving the needs of the business quite well.

Below are several assumptions that can derail your own business' opportunity to offer your employees a 401k plan.


  • It's not Worth the Effort to Provide a 401k Plan When I Don't Have That Many Employees.

Even if you are a small, self-employed business, it's still worthwhile to offer a retirement plan to employees. In reality, 401k plans provide enormous benefits, regardless of how large or small a business is. Those rewards include an employee's ability to contribute a large amount to a fund, to reap income tax benefits, to get emergency access to funds that can be repaid, and to select from Roth 401k choices, just to name a few. Those benefits can have quite a significant positive impact on both a business and its employees.


  • Offering a Retirement Plan Would Not Be Feasible Because Matching Employee Contributions Would Put My Business In a Financial Bind.

A business doesn't actually have to provide contribution matches in order to offer a 401k plan to its employees. However, even without matches, such a plan can provide numerous benefits for both a business and its employees.

Even if a small business owner decides not to initially match employee contributions, their decision isn't set in stone. Matches can actually be started or stopped by the company at any time, or even decided after the end of the year.


  • Management Fees are Too Costly.

Today numerous retirement-plan providers offer 401k plans that are affordable for businesses of any size. Once a single setup fee is paid, the annual cost to maintain the plan for a 10-employee company can cost as little as $1,000. Plus, the U.S. government gives businesses a tax credit of as much as $500 to offset those cost for the plan's first three years. Although such a tax credit isn't offered to self-employed business owners, their yearly cost of administering a 401k plan is significantly lower.

Also, plans can be established that keep maintenance costs under one percent at the employee level. Thus, they are able to invest more money into their retirement.


  • Business Owners Don't Reap Many Rewards.

Employer contributions, such as matching, are actually tax-deductible for a business. Plus, small business owners could also benefit from personal tax deferral options. Also, since employee contributions largely go in pre-tax, this lowers the company's payroll taxes.


  • Offering a 401k Plan is Too Risky.

Today, advisors and investment managers that retirement-plan providers assume the responsibilities and risks associated with offering such plans. This takes a lot of weight off the shoulders of the business.


  • Having a 401k Plan Wouldn't Interest My Business' Employees.

In 2016, Capital One Financial Freedom conducted a survey of employees across the nation. Some 83 percent of those responding said they felt that businesses, regardless of their size, should be required to offer retirement plans to employees. The study also revealed that almost half of small business owners that had fewer than 50 employees lost employees, in part, because they had no retirement benefits plan. Finally, research reveals that offering a 401k is a catalyst for recruiting and retaining employees for 94 percent of small business owners.


  • Administering an Employee Retirement Plan Would Consume Too Much Time.

Today, the process of starting and maintaining employee retirement plans is much easier, thanks to technological advances. Additionally, many providers offer investment line-up management, which frees the business owner of this responsibility.


By arming yourself with knowledge and appropriate resources, you will find that offering a 401k plan is an easy way to provide your employees with a valuable benefit that gives them peace of mind. Doing so takes little time, effort and money. Plus, it can have a significant positive impact on your business.


For more information about 401k plans for small businesses, please contact us.

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