You might think that setting up a 401(k) for small business is too difficult to even consider. You couldn't be more wrong.
As a small business owner, you want the best for your employees. This includes an attractive compensation package. Offering a 401(k) program for your employees isn’t just a matter of humanitarianism. It’s an essential part of keeping your best and brightest from defecting to larger companies. Setting up a 401(k) program for your employees is probably far easier than you think.
Dispelling the Myths
There are a number of myths about 401(k) programs floating around in the world of business. One of these may be the reason that you have not set up a 401(k) at your company yet. Reasons for avoiding creating a 401(k) include:
- Employee Disinterest: About four out of five employees consider it “socially responsible” to offer 401(k) plans.
- Matching Contributions: No laws or regulations require you to do dollar-for-dollar matching for employee contributions to a 401(k). You may offer as much or as little in the way of matching as you consider appropriate.
- Difficulties: The 401(k) savings program is available for businesses of all sizes, including the self-employed. Plans exist specifically for small companies with fewer than ten employees. Online accounts make it easy to set up a plan over lunch on the computer.
- Expense: Costs of 401(k) may not be as much as you think. Further, when considering the costs of the program you should consider the costs of not having a 401(k) -- such as losing your employees to firms that do.
Setting Up the 401(k)
Once you have seen that a 401(k) is an indispensible part of retaining talent, you will want to know how to set the program up.
- Research the market. Talk to other small business owners and colleagues to see what their experience has been with 401(k) plans. They may be able to point you in the right direction for your company.
- Gather information about your employees. When you request information from companies you will need to supply your employees start date, status and salary.
- Contact a number of providers. As with any other service, you would not make a purchase based on a single recommendation or plan. Contact a few different providers and see what they have to offer your company. Three is a good number of providers to start with as it gives you different options without overwhelming you.
- Review your options. Your chosen firms supply you with different plans that they can offer your company. These largely vary in how much you are willing to contribute to each plan. However, you will also want to consider factors such as quality of service and each plan’s past performance.
- Decide on a plan. Once you choose a plan your job is largely done. The firm that you do business with will take care of most of the nuts and bolts of setting the plan up. The rest will be done when your employees fill out their paperwork
Starting Your Company’s 401(k)
Getting a 401(k) at your business is far easier than you think. This is because one of the things that you are hiring a company to do is take care of all the dirty work for you. Your role as an employer is largely one of shopping around to find out what plan works best for your employees and your budget. Once you have decided this you can let the financial professionals take over and rest a little easier knowing that you won’t lose the cream of your talent to the greener pastures of your competitors.