The benefits of your business are compounded by the impact you can have on your employees’ lives and productivity.
Sponsoring a retirement plan and encouraging your employees to participate has a wide variety of benefits for you, your business, and your employees. By participating in the plan, you and your employees are investing for future financial security and can also receive significant tax advantages and other incentives.
While it is important for employees to understand how to participate in the plan, you may first have to educate them on why it’s so important. Effectively informing your employees of the benefits of participating in your retirement plan can significantly enhance the return on your investment and their satisfaction. According to a PWC employee financial wellness survey, one in four employees ranks a financial wellness benefit with access to unbiased counselors as the most desired employer benefit.1 The survey also revealed that 30% of employees say their finances have been a distraction at work. And the percentage of those caring for aging parents is even higher with 50% saying they are distracted at work by their finances. The study found, “Employees admit that financial worries have impacted their health, relationships, productivity, and time away from work.” Stressed employees are more likely to be distracted and less productive than other employees. They are also more likely to leave for another employer that cares more about their financial well-being.
Offering a retirement plan and access to a financial professional is a way to attract and retain employees and help them ease their stress around finances so they can better focus on their job. Another study found four out of five employees considered financial wellness programs so important to them that they would choose a company that offered them over one that didn’t, and 76% said that financial wellness programs would make them appreciate their company more.2 Many employers are aware that retirement plans encourage loyalty and productivity from employees, but it’s also important in helping an employee achieve the ability to actually retire! Employers in almost every industry are seeing an increase in the number of people continuing to work to a later age. Forty percent of all employees plan to retire later than they previously planned.1 A retirement plan and access to a knowledgeable, unbiased financial advisor could make a big difference for them.
If you can offer a quality retirement plan and the financial education to help them prepare, you help your employee and your company simultaneously. Financial education paired with guidance from a professional helps the seasoned employees as well as the newer hires. A competitive retirement plan motivates younger employees who will see an opportunity to grow their wealth within your company rather than looking for a way to earn more money elsewhere.
Although this past year has been difficult for many entrepreneurs and business owners, this is an excellent time to review, update, or start your business’ retirement plan. Business planning considerations such as health care, expansion through hiring, and capital investment may be on hold, but productivity of the current workforce is paramount. There are many options for offering a retirement plan that benefits you and your employees through tax-advantaged account options and credits. The IRS offers a retirement plan startup cost tax credit if you are newly establishing a plan for your company.3 Eligible employers may be able to claim a tax credit of up to $5,000, for three years, for the ordinary and necessary costs of starting a SEP, SIMPLE IRA or qualified plan (like a 401(k) plan.) This is an increase in available tax credits due to changes in the SECURE Act. To urge employers to become plan sponsors, the SECURE Act also encourages small-business owners to adopt automatic enrollment by providing a further $500 tax credit for three years for plans that add auto-enrollment of new hires.
See how your plan is doing and what options you have with our retirement plan analysis. CONTACT US today to speak with one of our advisors about your company’s retirement plan offerings and how we can help be a resource to you and your employees.
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
1) https://www.pwc.com/us/en/industries/private-company-services/images/pwc-8th-annual-employee-financial-wellness-survey-2019-results.pdf
2) https://www.prudential.com/wps/wcm/connect/5fcb0b6e-dc14-4d3c-8ee4-8b624b3285a8/Power_of_the_Wellness_Effect.pdf?MOD=AJPERES&CVID=n6nhFyH
3) https://www.irs.gov/retirement-plans/retirement-plans-startup-costs-tax-credit