4 Benefits of Investing in a 401(k) for Your Employees

If you’re a business owner, you know that there are endless opportunities for you to invest to grow and improve your business. Decisions on where to allocate your hard-earned capital aren’t easy. But one thing you should consider investing in is a retirement plan for your employees. 

As you conduct a cost-benefit analysis, here are some reasons you should consider investing in a 401(k) retirement plan for your employees.

1. Employee Satisfaction

The main reason you should invest in a 401(k) plan for your employees is that it helps you attract and retain top talent, especially if you provide a generous match. Job seekers are looking for employers that offer benefits that will improve their lives — things like good health insurance, generous PTO plans and excellent retirement savings options. Retirement plans are a central benefit that potential employees are looking for. 

Plus, one big 401(k) benefit for employers is that you can set up a vesting schedule for contributions. This may provide an incentive for your employees to stay at the company. With a 401(k), you can incentivize longevity with your company and reward loyalty. Over the long-term, lower turnover rates could improve efficiency in your company and reduce costs associated with hiring and training. 

1. Tax Credits

Here’s a big 401(k) tax benefit: employers can take advantage of a business tax credit that supports startup expenses during the first three years that a business with 100 employees or less offers a retirement plan. Depending on the number of employees who meet the eligibility criteria, you may be able to claim a credit for 50% or 100% of startup costs for the first three years. 

There is also a $500/year credit for three years if a business adds auto-enrollment to their retirement plan, regardless of when that plan was set up.

1. Tax Deductions

Subject to certain limitations, employer contributions to employee retirement plans are tax-deductible. These contributions are also not subject to Social Security or Medicare taxes. Paying fewer taxes means more of your earnings are available to be invested back into your business.  

1. You Benefit

The owner of a business benefits from a 401(k), as well. Because you’re also an employee, having access to a 401(k) allows you to save (pre-tax) for your own retirement. Everybody wins.

Take Advantage of Savings

If you’re thinking about starting a retirement plan for your employees, connect with a Farm Bureau agent or advisor to discuss your options.