Top 5 things businesess should know about 401(k) plans

The cost to have a 401(k) is not as expensive as you may think.

A common misconception is that starting a 401(k) plan is expensive. Just a few years ago smaller plans and start-ups had very few alternatives and most of those alternatives we high cost plans with questionable investment choices. Insurance company group annuities were also a common option in this market, again generally an expensive, unattractive option. There are a number of low-cost 401(k) options for small businesses today that thanks in large part to technological advances can offer a complete package including administration, education, and low-cost investing options at a reasonable price. Some of these providers serve as plan fiduciaries taking that responsibility off of the shoulders of the business owner.

Having a 401(k) plan can attract and retain top talent to stay competitive.

With the economy has largely recovered from the financial crisis unemployment is low and many companies are having a hard time finding the workers they need in some cases. Top talent expects to be well-compensated and a quality 401(k) plan is part of a top-notch compensation package. While likely not the main driver of determining whether a top prospective employee accepts your job offer, a really lousy 401(k) plan (or no plan) might be the "tie-breaker." Likewise, if a valued employee is being courted by a competitor and that competitor has a robust benefits package that includes a much better 401(k) plan that might be the difference between retaining the key employee or losing them.

Employee financial wellness can help the bottom line.

There are many articles written and studies done that point to a retirement savings crisis in this country. Part of the problem is the lack of availability of a workplace retirement plan for over half of U.S. workers. offering your employees a lost cost 401(k) plan is a great way to help them save for their retirement and relieve worried staff about their future. According to a survey by benefits consultant AON Hewitt about 90% of the country's 250 largest employers also recognize the impact of financial stress on their workforce and will be looking to expand or start financial wellness programs. Small businesses may not have the resources of these large companies but offering a solid, low cost 401(k) plan is a positive step for their employees on the road towards financial wellness.

This is not just a benefit to the employees but the owner as well.

Small business owners work hard to manage and grow their companies and too often the hope is that the value of the business will serve as their retirement plan. Maybe this will happen and they will find a willing buyer who will pay a premium price for the company and all is well. Maybe not and we often find this is the case leading to a messy end to a great start of a business. A 401(k) plan allows the business owner to contribute up to $18,000 or $24,000 (if 50 or over) of their compensation for 2017. In addition, they can make a profit-sharing contribution as well. This can bring the total combined employee deferral and employer contribution for the owner to an annual maximum of $53,000 or $59,000 if they are 50 or over. This can go a long way towards helping the business owner fund a comfortable retirement for themselves.

401(k)'s are not just for big businesses.

Traditionally the 401(k) options for small businesses have been limited due to high costs with less than desirable investment options. Thanks to technology there are a number of low cost and low-hassle options for small companies to consider. Offering a 401(k) plan is one of the best ways to reward the employees and owners for their hard work and set them up for future retirement success.