6 Risks of Not Offering a 401(k) Plan
Author: Siân Killingsworth / 19 Apr 2023 / 401(k) Plan Information
As a small business owner, you likely already know the benefits of offering a 401(k) to your employees. But have you thought about what could happen if you don’t? If investing in a small business 401(k) doesn’t seem worth the money, think again. Here are a few reasons it may actually save you dollars (and headaches) down the road.
1. You may run afoul of your state’s laws
Over 30 states have considered enacting state-mandated retirement plan legislation, with 14 states implementing those programs into law. If you do not meet the state requirements, you may be subject to fines and other unpleasant consequences. Check our mandate map to see if your state requires your small business to offer a 401(k) plan.
2. You risk lower employee morale….
Lower morale = lower job satisfaction. And lower job satisfaction means a decrease in productivity. Offering a quality comprehensive benefits package can help your small business’s employees feel satisfied in their roles.
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3. …and higher turnover…
When employees do not feel valued or supported by their employer, they are more likely to leave for another job. We know you know: Implementing a 401(k) plan for your employees is much less expensive than backfilling roles.
4. …as well as losing out on top talent.
If your job candidates believe they’re not being offered a comprehensive benefits package, they may decide not to accept a position at your small business in favor of a job that offers better benefits. Losing out on talented, valuable employees can be costly in terms of time, money, and once again, overall morale. In today’s job market, offering a competitive benefits package is considered de rigueur for attracting and retaining quality employees. If your competitors offer a 401(k) plan and you do not, you may find it more difficult to make high-quality hires.
5. You’ll likely lower your own retirement savings.
As a small business owner, your focus may be on growing your company rather than thinking about your retirement savings. However, not offering a small business 401(k) plan to your employees means you’re also missing out on the opportunity to save for retirement in a tax-advantaged way.
Are you aware that business owners can contribute to their own retirement as an employee and also make employer contributions? It’s true! You can put away up to $66,000 (or $73,500 if you’re 50 or older) in 2023 toward your own retirement as a small business owner. Don’t pass that up!
6. Potential for negative public perception.
In today’s socially-conscious world, companies are increasingly being judged – by their products, services, and yes, their values, and treatment of employees. If you’re not offering a 401(k) plan to your employees, it can give the impression that you are not committed to investing in their futures, which may damage your reputation with customers and potential hires.
Fortunately, setting up a 401(k) plan has never been easier. Find out how here.
Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice.