Don’t I Have to Offer a Match?
While matching employees’ savings is certainly a nice gesture, it’s not required. However, if you plan to maximize your own savings in the 401(k), you may consider offering a match to encourage employee participation in the plan. “The IRS requires testing each year to ensure the plan is fair to all staff,” Meadows says. “If the owners have the lion's share, it can look like you aren't making the plan attractive enough to the employees.”
Isn’t My Business Too Small to Design the Plan I Want?
There are a number of plan design options, and most can be customized to fit your specific needs, even if your company is very small. Meadows says to look for these essentials: pre-tax contributions from employees; a “discretionary,” or not required, profit sharing option; and loans. “Other than that, you basically want to create very few barriers to enter the plan,” Meadows says. “Immediate eligibility and vesting are great ways to do this. As you grow, you may want to amend the plan once you've gotten a good participation.”
As a benefit, the 401(k) should be used to help employees while creating a reason for them to feel incentivized. “For example, say you're running low in cash, but still wanted to give a year-end bonus,” Meadows says. “If you make profit-sharing contributions, you know it goes to their retirement, it's a great reward and that contribution is tax-deductible on your corporate taxes.”
Won’t It Be Too Much Work?
Offering any benefit takes some time and resources, but it doesn’t have to be a dealbreaker. Meadows recommends utilizing technology to avoid all the paperwork and streamline the process. “If you're a tech savvy firm, you may want a provider with more do-it-yourself, easy access,” he says. “However, if you want to pay for it, you can certainly have a very high touch, even local provider. Both would likely be easy to manage, but you get to decide what is best for you, probably based on cost.”