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Employee Incentive in a Tight Labor Market: Offering a 401(k) Plan

January 6, 2022
 

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More than 50% of U.S. business owners say it has gotten harder to find employees over the past year, especially with competition high for available workers. The need for eye-catching incentives becomes more urgent as businesses compete for the same pool of available employees and fight to retain high-quality workers. One of the key benefits business owners can offer is a comprehensive and competitive employer-sponsored retirement plan.

 

401(k) plans create added incentive for prospective employees

In today’s market, offering a 401(k) plan can be a great way to attract and retain employees. In fact, a recent study found that 68% of workers viewed a retirement plan as a key factor in deciding whether or not to accept a job offer. Adding fuel to the fire, many states are beginning to require some form of employee savings plan. Offering a 401(k) plan allows employees to “pay themselves first” as contributions come directly out of their paycheck which can make it easier to save and incorporate into a budget. As an added bonus, employers can consider matching a percentage of their employees' contributions.

 

Implementing an employer-sponsored retirement plan

Incorporating a 401(k) plan into employee incentive offerings sounds like a great idea, but how does a business owner add this to their portfolio of employee benefits? First and foremost, it’s important to work with a retirement plan specialist who can help navigate the nuanced and unique needs of the company. All businesses are different, so retirement plan solutions should be tailored to what works for each company and their staff.

Additionally, the past few years have seen quite a few legislative changes to retirement plans. The 2019 SECURE Act, the CARES Act passed in 2020 and now the SECURE Act 2.0 working its way through Congress all have implications for qualified retirement plans. Working with a specialist, whose job includes paying close attention to legislative changes, can ease the burden of staying informed and help business owners feel confident they are getting the right plan for their needs.

 

The benefits of working with a fiduciary

An important factor to consider when choosing a retirement plan is whether the plan advisor you would be working with acts as a fiduciary. First, let’s understand what a fiduciary is: a fiduciary advisor oversees all aspects of a qualified retirement plan and works with business owners to design a plan that allows their employees to retire successfully. A good fiduciary will review all aspects of the 401(k) including plan design, investment fund selection and employee communication. It’s typically a good idea for business owners to ensure their retirement plan provider acts as a fiduciary because this can provide peace of mind regarding their plan management. However, it should be noted that the business owner (who also normally acts as the plan trustee) maintains responsibility for overseeing the activities of any designated  fiduciary advisor in order to meet their required duties and obligations to the plan and it participants as the plan sponsor.   

Second, understand the two types of fiduciaries: 3(21) advisors and 3(38) advisors. The former share investment responsibility with business owners, while the latter take full responsibility for investment offerings within the retirement plan. Here at Girard, we can act in either capacity but in most cases we act as 3(38) fiduciary advisors, providing maximum protection to the business owner.

If you’re interested in learning more about Girard’s retirement plan services and how we can help you incorporate a retirement plan into your competitive employee compensation, please contact us to have a conversation.

 

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This article is for general information purposes only and is not intended to provide legal, tax, accounting or financial advice. The information in this article, and any opinions expressed therein, do not constitute a recommendation or an offer to buy or sell any security or financial instrument. Viewers should consult with their financial and/or legal professionals before making any financial decisions.