If the answer to the question, “Does your company offer a 401(k) plan?” is yes, you’re off to a good start. If your company doesn’t offer a 401(k) plan, what are some of the reasons behind this? In this post we look at why some business owners don’t offer retirement plans, why they should, and how to get employees to participate.
Many business owners fail to understand the value of a 401(k) plan for their company, they often believe it is too expensive, it will take too much of their time and there is an added administrational burden. In addition, perhaps no one has fully explained to them the benefits of a 401(k) plan for their company.
Understanding the benefits of a retirement plan is key in preparing business owners and their employees for retirement. Working with a competent advisor can help employers work though administrative issues they may be worried about. The truth is, the benefits of a 401(k) plan far outweigh the monetary commitment and time burden that would be incurred. Offering an additional benefit above and beyond employee wages, is a great recruitment and retention tool. It helps to acquire the best and brightest employees, and keep them around.
If employers do offer a retirement plan, but employees don’t participate, there are a few things employers can do to help. Workers may think they can’t afford to contribute to a retirement plan, but if they ever want to retire, they can’t afford not to. It’s likely no one has properly explained the benefits of the plan to employees such as a matching component or the benefits of making pre-tax contributions. Typically, people lack an understanding of how their plan works, what to do, and what the benefits are—if it’s not explained to them properly they aren’t going to participate.
Once a retirement plan is offered, the best way to engage employees is to lead by example. Encourage employees to participate and provide educational seminars to inform employees of plan benefits.