Starting a new 401(k) match plan can be daunting. So many impactful questions arise when the time comes for a business to consider adding this benefit. If you find yourself thinking more and more about a 401(k) match, keeping the facts straight is important. Here are a few myths about 401(k) plans debunked.
Do I need to offer a match?
Legally, no. The IRS does not require businesses to offer a matching plan. However, it is such a common practice now that employers should consider the positives of a 401(k) match. Many businesses use their matching percentage as an attraction for new workers. When considering who to choose from comparable companies, the benefits they each offer will be a huge factor.
Retirement Plans are expensive.
For a smaller business, the advent of 401(k) plan contribution matching can sound daunting. Allocating anywhere between 3% and 6% on average towards an employee’s plan could add up quickly, right? This myth can be debunked twofold.
First, these plans are much cheaper for the business in comparison to pension plans that were popular in the past. The burden of retirement falls upon the employee, with the employer taking a supporting role.
Secondly, 401(k) plans are tax-deductible! You can claim any matches when filing taxes. Not having to provide a pension plan and also being able to claim contributions when filing taxes makes a 401(k) plan the obvious choice.
Only larger companies offer a retirement plan.
Not true. According to the Bureau of Labor Statistics, 56% of businesses offer a 401(k) match. This number represents businesses of all sizes, therefore showing the popularity of 401(k) plans.
A 401(k) retirement program will be especially advantageous to a growing business that is looking to attract new employees and inspire current employee retention.
These are just a few of the many myths surrounding 401(k) matching. Look through our other blog posts to learn more about the benefits of starting up a 401(k) plan for your business.