How 401(k) Plans Can Boost Your Small Business’ Bottom Line

Author: Adam Bush, QKA, AIF® / Reviewer: Callie Adams Farnsworth, QKA, CAFCA
20 Mar 2023 / 401(k) Plan Information

Between hiring top talent, running your business, and keeping up with the industry, you probably have a lot on your plate if you’re a small business owner. Have you had time to think about retirement? We don’t just mean for you — we mean for your employees. A 401(k) plan could be the key to building loyalty and ensuring financial security for years.

A small business 401(k) can offer tax benefits.

401(k) plans are a great way for you, as a small business owner, to offer your employees an incentive to save for retirement. While this is certainly true, there’s another benefit that many people don’t consider: 401(k) plans can offer your small business some attractive tax benefits. Your company could qualify to earn up to $16,500 in tax credits over a 3-year period by starting a qualified retirement plan with auto-enrollment.

How do you calculate your tax benefit? It’s easy. (And we make it easier.) Check out our Secure Act tax calculator to figure out what other tax credits you may be eligible for.

Don’t forget about employer 401(k) tax savings. These are some of the most compelling benefits for many small business owners:

• Reduced taxable income for pre-tax salary contributions
• Ability to make after-tax Roth contributions
• Business tax deduction for plan contributions and plan expenses
• Growth on investments while in the plan

A 401(k) plan can be an effective way to gain and keep good employees.

It’s also a great way to help your employees save for retirement. For example, if you offer matching contributions into the plan, you can incentivize your workers to put money in their accounts and encourage them to stay with your company longer. Employees in particular appreciate having access to a 401(k) for several reasons. They can:

• Reduce taxable income with pre-tax deferrals.
• Save for their future.
• Obtain employer contributions if employer matches.
• Get savers credits if they qualify

How does this benefit your bottom line? Offering a 401(k) is an easy way to increase employee morale, which has been associated with greater job satisfaction, higher productivity, and reduced turnover.

Matching Contributions: This is a 401(k) plan option that benefits both employees and employers. The match is the most popular 401(k) plan incentive, and it’s easy to see why. Knowing they are getting free money can be very attractive to employees, and tends to make them more inclined to stay with your company for a longer period of time – particularly if there is a vesting period to meet.

Reducing turnover helps reduce the potential expense associated with searching for new candidates to fill roles, interviewing, hiring, and training new employees. Plus, when you make a contribution to an employee’s 401(k), that contribution is tax-deductible from your company’s taxes.

Call us today for a free, no obligation small business 401(k) consultation: 1.866.845.5058