Over the past decade, the legal cannabis sector has evolved into one of the fastest-growing industries in the United States, consistently generating annual sales in the billions of dollars. As of January 1st, 2020, marijuana has gained legal status in 11 states for adults over 21 years of age and 33 states have legalized cannabis for medical purposes.
For what was once a product only sold on the black market, cannabis is now being utilized in various mainstream industries including health, food, beverage, fitness and even cosmetics. According to the Medical Cannabis Network, sales for CBD products alone are projected to reach 22 billion by 2022.
Large plan providers aren’t supporting cannabis
While cannabis has made remarkable strides over the years, gaining support from the federal government proves to be an uphill battle.
Given the complicated nature surrounding cannabis financial regulations without federal legalization under the Controlled Substances Act, combined with reputation-related drawbacks, many “big name” retirement plan providers are unwilling to support companies operating in cannabis.
Ultimately, the vast majority of cannabis organizations are unaware they can offer competitive compensation and benefits packages. To set the record straight, it is 100% legal for cannabis companies to offer their employees retirement and health plan benefits.
In fact, a few of the more established names in cannabis—Tilray, Aurora Cannabis, and Canopy Growth—already offer various retirement and health perks to their employees.
With respect to a 401k plan specifically, Jewell Lim Esposito, Esq., an ERISA Partner at the law firm of FisherBroyles, LLP, “the Internal Revenue Code expressly permits cannabis employees to participate in a retirement plan just like other, non-cannabis employees.”
Long-term benefits directly influence turnover
In most organizations, retirement benefits are a standard. As the cannabis industry works towards federal legalization, offering employee benefits like retirement plans will improve the perception of the industry, gaining more legitimacy in the eyes of the public.
“People assume their new employer has a 401k. At this point, that type of retirement plan is one of those things that has become an integral part of all businesses, but cannabis companies can’t say the same” notes Fred Whittlesey, Founder and Principal Consultant at Compensation Venture Group.
If cannabis companies want to attract and retain loyal, long-term workers, they need to seriously consider implementing retirement plan benefits. Employees in today’s market are searching for opportunities that improve their overall quality of life in ways that are not solely based on salary.
In fact, a study from Glassdoor found that the top 3 benefits correlating to overall job satisfaction include:
- Health insurance
- Vacation and PTO
- Retirement/pension plan
“The main reason cannabis owners put a 401k plan in place is to keep their employees, typically middle management and below, from jumping ship as soon as a new cannabis startup comes along” adds Whittlesey.
The cannabis industry has shown above-average turnover rates, with nearly 60% of workers not making it past two months. Offering benefits such as 401ks and Cash Balance Plans can help improve employee retention and increase satisfaction.
Furthermore, offering a retirement plan will help cannabis companies attract highly skilled workers, a group the industry has struggled to retain in the past.
The competitive advantage
As soon as cannabis becomes federally legal, large financial institutions will want to spring into action to provide more retirement plans for cannabis.
Yet, with the Internal Revenue Code already permitting these plans, cannabis organizations can establish a plan right now to keep up with their peers. The sooner a cannabis company offers a retirement plan setup, the further ahead they’ll be in terms of innovation and competition for recruiting, hiring, and retention of employees.
In regard to rules and regulations, cannabis is an extremely complex industry to operate in. Likewise, the retirement plan administration industry is a very complicated space as well. That’s the hesitation for most retirement benefits providers who won’t even give cannabis companies the time of day.
However, as the cannabis industry progresses, the demand for retirement plan providers who specialize in innovative setups and nontraditional investments continues to grow.
Over the past five years, several smaller retirement plan providers have collaborated with legal and financial services experts to created 401k plans and other employee benefits packages, designed specifically for companies in the cannabis industry.
With federal legalization just around the corner, cannabis companies need to seriously consider implementing retirement plans if they want to stay ahead of the curve and have a competitive advantage.
An attorney and entrepreneur, Kirsten Curry is the founder and president of Leading Retirement Solutions, a full-service retirement plan provider. Curry founded Leading Retirement Solutions with a commitment to three core principles: transparent and un-biased services; custom open-architecture retirement plan solutions; and access to traditional and non-traditional investments.