What is one thing I should consider before deciding whether to offer 401(k) plans to my employees?
For many companies — especially startups — deciding whether to offer a retirement plan for employees is often the LAST thing on their to-do list. While many employers want to offer this important benefit as an incentive to recruit and retain great people at their company, they are daunted by the uncertainty of choosing a plan. It can be time-consuming and daunting to try to work through the costs and intricacies of managing a 401(k) plan.
Thanks to changes in technology and the transparency of fees and low-cost alternatives, it is now much easier than it used to be for startups and small companies to implement a 401(k) plan. Based on my experience, I would argue the most important thing to consider is employee demographics. One thing most employers don’t consider is the design of their plan. For example, it’s important to know the average age of plan participants and how the plan might benefit them. Taking the time to figure this out will help you select the plan that makes the most sense for your company and its employees.
As a Retirement Plan Advisor, I have come across so many failed, broken and unnecessarily expensive plans. Why? Because many small businesses get sold on the idea of offering a 401(k) by someone who is not a fiduciary. Fiduciaries are legally bound to put the interests of their clients above everything else. When it comes to implementing and managing your company’s retirement plan, you really need to work with an expert advisor who is a fiduciary.
Before you set up your company retirement plan, look to work with an advisor who is either an ERISA 3(21) fiduciary or, even better, a 3(38) fiduciary. Also, make sure they specialize in managing retirement plans and they take the time to learn about and understand your employee base and culture. The right fiduciary advisor will help you design and implement a plan customized to your company. She should also take the time to educate your employees on the extreme benefit that this plan offers. By doing a little research and hiring the right plan advisor, you will benefit by attracting and retaining key employees.