Hiring and retaining talented candidates can be difficult in today’s marketplace. If the candidate you’ve offered the position to is juggling multiple offers, their selection might boil down to one thing — the company’s benefits packages. Your ideal candidate is most likely to choose the company with the most competitive benefits package.
What Are the Benefits of Having a 401(k) Package for Your Employees?
Offering a 401(k) benefits package isn’t mandatory as an employer, but there are several incentives to provide one:
- Attract qualified talent: Set yourself apart from the competition by offering talented candidates a comprehensive benefits package.
- High retention: Show your employees they’re valued by matching their investments in their future with a 401(k).
- Long-term company success: Your company’s success is directly tied to the talents, qualifications and capabilities of your workforce.
To ensure you offer the best packages your company can, we recommend you annually review your benefits packages for new and existing employees.
Does An Employer Benefit From a 401(k) Matching Plan?
There are several benefits of a 401(k) plan — for you and your employees. For example, you can both benefit from tax breaks with 401(k) plans. Money contributed to a 401(k) is tax-deductible and accumulates on a tax-deferred basis, subsequently lowering both of your tax brackets.
If your employee’s salary is $80,000 and they contribute $18,000 to their 401(k), they are lowering their tax bracket because their salary then becomes $62,000 when you deduct the $18,000.
Employers benefit from a matching plan, too. The money you contribute to their 401(k) is also pre-tax, lowering your tax bracket. Remember to contribute to your own 401(k) because this allows for salary deferral and profit-sharing contributions.
What Are the Benefits of Offering A Retirement Plan and 401(k) to Your Employees?
When you match your employee’s contributions to their 401(k), they are accepting free money — which is an incredible incentive, especially if your contributions outdo another employer’s. Even better, the money you and your employee invest into a 401(k) generates more savings for both of you in the long term.
You can provide salary-based, company-profit or dollar-for-dollar amount matching contributions depending on your preference:
- Dollar-for-dollar: With a dollar-for-dollar matching contribution, you match their contribution down to the dollar — so if they contribute $5,500 annually, you will, too.
- Percentage-based: Rather than contributing 100% of what your employee puts into their 401(k), you can contribute a certain percentage. For example, it’s common to match 50% of their input. If your employee contributes $5,500, you contribute $2,750.
There is a maximum contribution limit to a 401(k) between an employee and employer. According to the IRS, as of 2021, the maximum contribution amount is $58,000.
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