As the unemployment rate has dropped, hiring has grown increasingly competitive – especially for businesses with highly-specialized positions. It’s important to understand how retirement matches factor into the hiring process and how they can financially benefit your company. Here are a few reasons why offering a retirement match helps your business.
If you don’t offer a retirement match, chances are your competitors do, meaning it’s more difficult to attract top talent. A full benefits package that includes a retirement match may prevent you from paying top dollar to win candidates who might consider a job offer from your competitors.
In order to reap the largest rewards attached to a retirement plan match, employees often must work for a particular period of time, known as vesting1. This timeframe encourages employees to stay and maximize their contributions to receive the best benefits. Since replacing a departing worker is expensive2, reduced turnover brings cost savings.
Your finance department will love the savings received at tax time from your retirement plan match. Businesses can deduct every dollar they contribute toward employee retirement plans in addition to the tax savings employees reap for participating. Small and mid-sized business may also be able to deduct their retirement plan startup costs under the Credit for Small Employment Pension Plans Startup Costs3.
In most states, businesses aren’t required to offer retirement plans for their employees, but that is changing. Seven states4 now have a government-mandated retirement option in place for residents, and in Oregon and Illinois5, employers are required to enroll their workers in a plan. By having an employer-matched retirement plan in place, your business will be prepared if a mandate impacts your workplace.
By understanding the benefits of a retirement plan match, your business can make informed decisions and save money. For further questions about matching or other questions relating to retirement plans, contact your plan advisor.
The More You Know: Automatic Enrollment Notices
Many retirement plans today provide automatic enrollment for employees, meaning the plan sponsor initiates enrollment into the retirement plan on behalf of the employee. One common question plan sponsors come across is whether their enrollment kit satisfies the annual automatic enrollment notice requirement.
At first glance, it may seem that enrollment kits contain all the necessary information to satisfy your obligation to provide an annual notice of your plan’s automatic enrollment feature, however the notice must include the following information:
- The default contribution rate that will apply if the participant does not make an affirmative deferral election.
- The employee’s right to elect not to have the default rate apply, or to elect a different contribution rate.
- How default contributions will be invested absent an investment election by the participant.
- The notice must be provided before each plan year.
Do you expect to send out enrollment kits to all covered employees before the beginning of each plan year? Since most plans merely provide an enrollment kit at the time an employee first becomes eligible to participate, the enrollment kit will not likely satisfy the annual notice requirement.
For more information on automatic enrollment notification requirements, contact Quintes.