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.
Employee Retirement Savings
By offering a retirement plan match, you are encouraging your employees to save! Many employees look to the match formula as a suggestion of how much they should be saving. For example, if your retirement plan match is 100% of 3%, many think they only need to be saving 3%. But, what if the formula was 50% of 6%? Your costs as a company would remain steady, but your employees would likely start saving closer to 6%. Consider stretching the matching formula so your employees are encouraged to save more for their retirement.
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.