Among the employee benefits popularly discussed in recent years, healthcare coverage and retirement plans like 401k plans have been taking the spotlight. Issues concerning rising student loan debt and the reality of longer life expectancies have made retirement plans a bigger concern for workers, employers, HR managers and benefits providers.
Maximizing the employee benefits related to prevailing wage retirement requires knowledge and planning. Many employers don’t offer 401k plans, and these are often due to misconceptions. To help clear out unfounded misgivings about the benefits of retirement plans, here are some 401k myths debunked.
Myth #1: 401k plans are too expensive for the employer
As much as half of small business owners surveyed in a recent study don’t offer 401k plans because they believe it is too expensive. However, cost calculations, especially relative to other fringe benefits an employer can offer, says otherwise.
Tax benefits from retirement plans help offset the cost. There are even tax incentives for new plans that can go as high as $1500 for three years. Expenses like matching (which is not required with a 401k) and profit sharing can be deducted from business taxes as well.
Myth #2: Employees don’t want a 401k plan
Some think that employees aren’t looking for a 401k plan, either out of a lack of interest or because they can’t afford prevailing wage retirement plans. The truth is that retirement plans are becoming a staple in the current recruitment and retention practices across all industries. Employees are seeing the value of long-term security through 401k plans.
Myth #3: Small businesses don’t have the right size for retirement plans
Retirement plans don’t need to be too expensive or too large for your small business. Employers can start with a small plan which can grow as their business grows as well.
Myth #4: There’s no need for a retirement plan
Unfortunately, there are some people who believe that they can rely on their own business as a “nest egg” or who believe that they will never retire anyway. While these are ideal scenarios, preparing for the worst is still the best option. Factors like the economy, consumer demand, personal health, emergency and family needs vary over time.
Myth #5: A SIMPLE IRA is enough
Employer providers sometimes choose not to offer a 401k plan because they already have a SIMPLE IRA. However, there’s a clear difference between the two. Individual Retirement Accounts have a much lower maximum annual salary deferral. The catch-up contribution over the age of 50 of a 401k retirement plan is also twice compared to a SIMPLE IRA. Plus, 401k plans have Roth option opportunities, loan availabilities and profit sharing.
Learn More about Prevailing Wage Retirement Plans and Employee Benefits with ARCHER JORDAN
ARCHER JORDAN is a third party administrator providing fringe benefits to government contractors and hourly hires. We have decades of experience in facilitating the provision of fringe benefits, including medical coverage and retirement plans. With our help, you can focus on making your business grow. Contact us today!