Many workers already prefer the closeness and greater impact they can achieve at a smaller firm versus the proverbial cog in the wheel syndrome that can take hold within a massive organization where individual contributions can go unnoticed. Historically, benefits have often been lacking in small businesses and that’s given top employeesreason to take pause. But now trends are aligning and 401(k)s are often used as an advantage by savvy small business owners. So what’s making this all possible? Two things:
- The Availability of Low-Cost 401(k) Plans for Small Business: During the past decade, a new generation of 401(k) providers focused specifically on small businesses have made it affordable for any size business to start a plan. A ten person company can now expect to pay a one-time charge for plan setup, and around $100 a month on-going for recordkeeping. This cost is further offset by a tax credit of up to $500 each year for the first three years of starting a 401(k) plan (a total of $1,500 total tax credits over the three years). This is available to businesses with up to 100 employees. This credit is not available to owner-only 401(k)s, also known as individual 401(k)s.
- 401(k) Cost-Cutting by Big Business: Many large companies slashed their 401(k) plan benefits since the recession of 2008 and 2009. Suspending the employer match was a common practice for many corporations to both settle shareholders and get through the downtimes. For those large firms that have been fortunate enough to reinstate it, the match is often at a lesser amount or requires more contributions by the employee to receive a similar company match.
Small Business Matching Stands Out
There are more and more alternatives for small businesses to effectively compete with big business with regard to retirement plans.
Please comment or call to discuss how this affects you and your organization.
- How to Manage Your 401(k) Through Market Down Swings (401kplanadvisors.com)
- The Independent 401(k) Plan (moneymanager.com)
- Customizable 401k Plans (401k-plan-blog.com)