Rather than turning to unlimited PTO policies or features dedicated to employee communications, a report by Guideline urges plan sponsors to look deeper within the workplace plans, and potentially the 401(k).
A survey conducted by the 401(k)-platform found that while employers and employees both agree that retirement benefits are valuable, some companies underestimate their value in attracting and recruiting employees. As 93% of participants in the survey note that a retirement benefit would influence their decision in joining a company, only 36% rank retirement benefits within their top three most valuable features.
When asked about their top five employer benefits, 81% of employees placed retirement as a leading feature. However, 62% of employers did the same.
Findings show that prospective employees value retirement benefits. One in two employees say they would turn down a job offer from a company that did not offer a retirement benefit, while one-third would trade in a lower salary for the equivalent value in a retirement benefit.
Guideline research shows that offering retirement benefits could pay off for employers. While only a third rank the benefit within their top features, 70% of employers agree that offering a retirement benefit has impacted employee recruitment and retainment.
Most choose not to offer the benefit because of cost, but Guideline research shows that replacing employees can cost up to two times of their annual salary. If employees consistently leave their employer because of a lack of retirement benefits, it could end up costing them way more than it would to offer a benefit, Guideline adds. The research shows that companies with over 100 employees and who offer an average salary of $50,000 can expect to see turnover costs of up to $2.6 million per year.
“Despite the benefits a 401(k) can provide, more than two-thirds of benefits decisionmakers that don’t offer a retirement benefit cite cost as a barrier,” the research reported.
Startup tax credits offered by SECURE 2.0 legislation could mitigate expenses for employers, but over half of benefit decisionmakers in the survey were unaware that they could qualify. Under the legislation, employers can claim the credit if they:
- Have 100 or fewer employees who received at least $5,000 in compensation from the employer for the preceding year;
- Have at least one plan participant who was a non-highly compensated employee (NHCE); and
- In the three tax years before the first year the employer is eligible for the credit, its employees weren’t substantially the same employees who received contributions or accrued benefits in another plan sponsored by the employer, a member of a controlled group that includes the employer, or a predecessor of either.
“In fact, eligible companies can claim up to $16,500 in tax credits when starting a new 401(k),” Guideline says. “For some, those credits could cover 100% of the plan costs for the first three years.”
SEE ALSO:
- SECURE 2.0 Startup Tax Credits Explained in New Resource
- Pete Swisher Deciphers SECURE 2.0’s Complex Startup Tax Credit
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
