Five Reasons To Start A 401(K) Plan

There’s never been a better time.

Did you know that small business drives over 95% of the U.S. economy and employs over 60% of the workforce, yet fewer than half of these companies offer their employees a retirement plan?¹

Here are five simple reasons your organization should take action against this shortfall by starting a 401(k):

1. Helpful new laws. Thanks to the SECURE 2.0 Act of 2022, now is a great time to start a 401(k). Now employers with 100 or fewer employees are offered enhanced tax credits to start a plan. Tax credits are not deductions – they reduce your business’s tax liability dollar for dollar. For qualifying employers, that adds up to a potential credit of $16,500² – plus other available credits for certain employer contributions – over a three-year period. (And depending on the state, new mandates may now require employers to offer a retirement plan.)
2. Opportunity for tax deferrals and deductions. Your organization’s employees (including yourself) can save taxes today through pre-tax contributions and let retirement money grow tax-deferred. Although employer contributions are not required for a 401(k) plan, they can help your bottom line by trimming your tax bill. Employer matching and profit sharing contributions are tax-deductible and not subject to Social Security or Medicare taxes.
3. The need to attract and retain top talent. Over 80% of Americans say that retirement benefits are a major factor in the choice to accept or reject a new employment offer.³ Now more than ever, the availability of a retirement plan is an expectation, not a luxury, to most workers.
4. A boost to employee financial wellness. Nearly three-quarters of employees say that reducing employee stress is a key objective for them.⁴ In today’s environment, mental, physical and financial health are intertwined. Introducing a retirement plan to your overall benefits program will help employees feel more confident in their financial future, leading to a more focused and enthusiastic workforce.
5. Availability of professionals to help. You don’t have to go it alone. The Department of Labor encourages employers to hire prudent experts to ease the fiduciary burdens of offering a retirement plan. This may sound expensive, but rest assured that Raymond James is committed to bringing the high-quality, low-cost solutions more typical of larger plans to the small business community. Because every organization, no matter the size, should have the ability to offer a quality 401(k) plan so that every worker can save for retirement.

¹ Source: https://smallbiztrends.com/small-business-statistics,

²Small businesses with up to 50 employees can now receive a federal tax credit for plan administrative costs up to $5,000 in each of the first three years of a new plan. Additional credits are available for employer contributions to these startup plans. In particular, a credit of 100% of the contribution, up to a maximum of $1,000 per employee, is available the first year of a plan’s creation; a credit of 75% of the contribution, up to a maximum of $750 per employee, is available the second year; a credit of 50% of the contribution, up to a maximum of $500 per employee, is available the third year; and a credit of 25% of the contribution, up to a maximum of $250 per employee, is available the fourth year. These contribution credits are phased out for employers having between 51 and 100 employees at 2% per employee over 50 employees. Source: Raymond James, “SECURE Act 2.0: Changes to Employer-Sponsored Retirement Plans”

³ Source: 19^th Annual Transamerica Retirement Survey of Workers,” April 2019

⁴ Source: Franklin Templeton’s “Voice of the American Worker” survey

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.