As a business owner, you're constantly balancing priorities—from managing daily operations to keeping your finances in check. With so much on your plate, offering a 401(k) plan may seem like just another task on the to-do list.

However, offering a retirement plan can be a powerful tool that delivers lasting benefits for both your company and your employees. Beyond helping employees save for the future, a 401(k) plan can help you attract and retain talent, meet your state’s retirement plan mandate, and take advantage of favorable tax credits.

The Business Case for Offering a 401(k) Plan

Whether you're a small business owner or managing a growing organization, implementing a retirement plan is an investment that can pay off in more ways than one. Below, we’ll explore four reasons why offering a 401(k) plan can be a game-changer for your business.

Attract and Retain Talent

In today’s competitive job market, a strong benefits package can be the deciding factor for candidates. With over 85% of employees expecting a retirement plan, offering a 401(k) is essential for attracting top talent. Signaling long-term investment in employee welfare and financial security, 401(k) plans can help companies stand out.

Once you've secured top-tier talent, a 401(k) can also aid in retention. In fact, research shows that workers with an active 401(k) plan are 32% less likely to leave in any given month. A retirement benefit can combat employee turnover expenses—which can cost a company up to two times the employee's salary. With options like eligibility criteria, employer contributions, and vesting, businesses can set up a plan that rewards employees who stay for longer.

Meet Your State’s Retirement Mandate

Over 20 U.S. states have launched public retirement savings programs to help their residents save for the future. Many of these programs have deadlines that require certain businesses to either register for the program or launch their own retirement plan, such as a 401(k). Businesses that don’t comply can face penalties. Launching a 401(k) plan helps you stay compliant with these rapidly developing state regulations.

Take Advantage of Tax Savings

Businesses may be eligible for thousands of dollars in tax credits. These credits—a dollar-for-dollar amount that reduces the tax owed by the business—are designed to help offset the costs of setting up a plan. Here are the credits currently available:

• The Startup Credit: A tax credit for certain costs associated with starting and operating a new plan, up to $5,000 per year for the first three years.
• The Auto-Enrollment Credit: Employers who add auto-enrollment to their plan may claim a tax credit of $500 per year for up to three years.
• The Employer Contribution Tax Credit: Businesses may receive tax credits of up to $1,000 per year for contributions made to each eligible employee’s account, for up to five years.

Also, if you decide to provide an employer contribution to your employees’ plans, those expenses are typically tax deductible. And, of course, your own personal contributions to your 401(k) plan can lower your personal taxes for the year, too.

Improve Retirement Readiness

Over 75% of employees are worried about their financial situation. Providing a 401(k) plan is a proactive approach to enhancing your employees' retirement readiness, ultimately helping employees to be more focused and productive at work.

As employees increasingly look to employer-sponsored plans as a primary source of retirement savings, enabling options like automatic enrollment and employer contributions can boost savings rates and promote a culture that prioritizes future planning and employee well-being.

Set yourself up for retirement readiness too! Just like employees, business owners need a retirement plan that helps them save for their future.

The Bottom Line

Since their introduction in 1978, 401(k) plans have become a powerful tool not only for helping individuals save for retirement but also for bolstering the businesses that offer them. Beyond supporting employees’ financial futures, these plans provide valuable tax incentives and play a key role in attracting and retaining top talent.

By starting a 401(k) plan, you’re investing in both your employees' well-being and your company’s long-term success. With today’s tax credits and simplified setup options, there’s never been a better time to get started.

Take the next step today and unlock the benefits of a retirement plan designed to help your employees thrive—and your business grow.