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

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 in order to grow and improve your business. Decisions on where to allocate your hard-earned capital aren’t easy. As you conduct a cost-benefit analysis, here are some reasons you should consider investing in a 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 insurance, generous PTO plans and retirement savings options. The various vesting schedules also allow you to incentivize longevity with your company and reward loyalty.

2. Tax Credits

There is a business tax credit of up to $500 each year for startup expenses the first three years a business with less than 100 employees offers a retirement plan. The SECURE Act of 2020 increased that to $5,000 a year for 50% of startup costs a business needs to set up and administer a plan if eligibility requirements are met and the plan begins in 2020 or later.

The SECURE Act also added a $500/year credit for three years if a business sets up a plan with automatic enrollment in 2020 or later.

3. 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.

4. You Benefit

The owner of a business also benefits from a 401(k), as well. You take a salary, and even if a lot of your capital is tied up in the business, offering a 401(k) allows you to save (pre-tax), as well as enjoy the security of having a 401(k).

Employer supported retirement plans used to be offered primarily just for employees of large businesses, but that isn’t the case anymore. If you’re thinking about starting a retirement plan for your employees, connect with a Farm Bureau agent or advisor to discuss your options.  

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