How to Support and Grow Your Small Business With 401(k)

Growing your business is always top of mind, and as a small business owner, you have to work strategically to earn community support and grow brand awareness. While holding a sale or giving out coupons may facilitate the expansion of your business, consider how offering a 401(k) and financial wellness education as part of your benefits package can be an alternative strategy to stand out, as well as attract and retain team members who can help your business grow in the long-term.

Bolstering community support and growing your small business is no small feat, but by supporting your financial future, as well as that of any employees on your payroll, you can foster a positive image and reputation for your business.

How a 401(k) plan supports your business and employees

The 401(k) plan has become one of the most common ways to save for retirement, yet many small businesses in the U.S. haven’t started taking advantage of the many benefits offered by a 401(k)—for both the business and the individual.

You might also be interested in: Is My Business Too Small to Offer a 401(k) Plan?

Tax advantages of a 401(k) plan

From the business owner’s perspective, a 401(k) plan can provide a wide range of benefits, but its unique tax-advantaged ability to support employees' financial security in retirement is what really makes it an important feature in the much-desired benefits package workers are seeking.

Additionally, any employer contributions in a 401(k) plan—whether in the form of an employer match or profit share —are tax deductible. By making contributions as an employer, you can save money on taxes and boost the retirement savings for yourself and any employees. Plus, with your own contributions, you can reduce your personal taxable income and maximize your savings potential.

A safe harbor 401(k) plan, which requires a set employer contribution to support your employees, can even make it simpler to pass nondiscrimination testing for your 401(k) plan—which means fewer administrative to-do list items for you, the plan sponsor.

Satisfying retirement state mandates

Many individual states are passing legislation making retirement savings vehicles a mandatory employer offering, and a 401(k) plan not only satisfies state mandates, but provides more opportunities for both small business owners and employees to save more effectively for the future. Review this year’s annual contribution limits to learn more about contribution limits for different types of plans.

As you can see, a 401(k) not only offers the benefit of meeting the requirements of a state mandated retirement plan, but has a much larger savings potential than an IRA as well.

Boosting employee retention with 401(k)

Employees working to support your small business may feel more loyalty to you as their employer if they feel that their work is contributing to their own goals and success¹. By offering a 401(k) plan, you open up the opportunity for you and your employees to make tax-deferred contributions and take advantage of compounding interest to save for the future. Combine your plan with helpful tools and education to give your employees the opportunity to be part of a team that prioritizes their financial wellbeing.

Not only does a boost in employee wellbeing help you retain current team members, but it can serve as an advertisement and strategy for attracting valuable future employees. Current employees are more likely to recommend you as an employer if they feel supported, and with many small businesses not offering a 401(k) plan, your business can stand out from competitors in your area simply by creating the opportunity for employees to save for their future.

Financial wellness education as an employee benefit

Workers are seeking employers who are also willing to help them with their everyday financial decision-making, along with saving for retirement. A recent study showed that employee interest in financial wellness tools and resources has increased dramatically over the last few years, with the number of workers who view those offerings as “must-have’s” increasing from 18 percent in 2019 to 45 percent in 2023¹.

Additionally, 75 percent of employees say a 401(k) or other defined contribution retirement plan is a “must-have” benefit¹, but when you start thinking about sponsoring a 401(k) for your small business for the first time, it can feel overwhelming to get the ball rolling. Consult with your financial advisor and be sure to mention your interest in saving for your future, as well as supporting the goals and financial wellbeing of your team. The right plan administrator will work with you and your advisor to customize a plan to meet your needs, communicate all the steps along the way, and encourage your employees to get enrolled and participate in the plan.

As Ascensus, we believe everyone deserves a secure financial future. That’s why we work with employers of all sizes to offer retirement plan options that fit the unique needs of each business.

For more information about our small business 401(k) solution, contact our team at 833-893-3233.

Sources:
¹2023 U.S. Employee Benefit Trends Study, Metlife, 2023