Not only does it provide them with financial security in their golden years, but it also incentivizes them to stay with the company longer. In this blog post, we will discuss four retirement plans that your employees will want to stay for.
But first…
When designing a retirement plan, it is important to find the balance between creating a “rich plan” and incentivizing longevity in the employees. A rich plan offers generous benefits that encourage employees to save for their retirement.
On the other hand, if the benefits are too generous, employees may become complacent and not work as hard. It is important to find the right balance so that employees feel appreciated and are also motivated to stay with the company for a long time.
A vesting schedule is a timeline by which an employee becomes fully vested in their retirement plan benefits. This means that they have ownership of all the benefits they have accrued and can withdraw them without penalty. There are two types of vesting schedules: cliff and gradual.
With a cliff vesting schedule, employees become fully vested after completing a certain number of years with the company. This can be good for employers who are looking to save benefits for loyal employees.
A gradual vesting schedule, on the other hand, allows employees to vest gradually over a period of time. This is a more gradual process and gives the employees a target to reach down the road and incentivizes them to stay longer. The hope is that the longer the vesting schedule, the longer the tenure of your employees.
Here are 4 plan types that will make your employees want to stay with your company:
A Traditional 401k is a type of retirement plan that allows the employer to design a plan from scratch. This means that they can create a matching and vesting schedule based on their goals. Whether it’s for employee retention, or to fit the plan within the company’s budget. The benefits of a Traditional 401k include:
A Traditional 401k is a great option for employers who want to create a vesting schedule. They can match employee contributions on a gradual or cliff vesting schedule. This allows employees to become fully vested in their benefits over time and incentivizes them to stay with the company for a long period.
A QACA is a type of Safe Harbor 401k that has a 2-year, cliff vesting schedule. As opposed to the Standard Safe Harbor, that has an immediate vesting schedule.
This plan is great for businesses with high turnover to incentivize the employees to stay longer, but also to keep any matching contributions within the company if an employee were to leave within the two years.
Its benefits include:
A profit-sharing plan lets employers offer profit-sharing plans as a way to attract and retain employees. Profit sharing is a great option as employees like the idea of being apart of the growth and success of the company.
Other benefits to profit sharing include:
Cash balance plans are a type of defined benefit plan that can be used as either a pension or as a supplemental retirement plan. It is a great solution to highly successful business owners with a smaller employee pool.
Cash balance plans have many benefits, including:
As an employer, you should consider implementing one (or more) of these plans as part of your overall compensation package.
If you are self-employed without employees, keep in mind that starting a solo 401k plan allows you to save tax-free for retirement and offer employer contributions to yourself.
Building a custom plan based on the goals of your company is a good practice of any employer. Whether it’s tax savings or the recruitment & retention of high-quality employees, our 401k experts can help you design the best plan for your goals.
If you need help finding which plan makes sense for your company, schedule a plan discussion with us or take 30 seconds to find which plan is best for your company with The Retirement Plan Evaluator.