This makes your 401k and other retirement benefits cornerstones for your Human Resources recruitment and retention strategy. Do you know everything you need to know to serve as the "go-to" source for this information?
What is a 401k Retirement Plan?
The 401k retirement plan provides a means for employees to accumulate retirement income. According to William Sullivan in Human Resources for Small Businesses (compare prices), the government permits employers to sponsor 401k plans to encourage employees to save for retirement."These plans enable employees to apportion a fixed percentage of their paycheck as savings on a pre-tax basis, before most withholding taxes are deducted. The money is deposited into a trust account with a bank or other financial services company for investment purposes."
Sullivan says that, "Account balances are maintained separately for each participating employee and investment earnings are sheltered from taxation enabling savings to compound at an accelerated rate. Regulatory restrictions and penalties exist for withdrawals made prior to retirement."
The 401k is the most flexible type of retirement plan. Employers can contribute to the plan for employees or your company can sponsor a plan to which only the employees contribute with salary deferral. The 401k plan may be most appropriate for companies with at least 10 employees. You will find an excellent resource that discusses the benefits and details of a 401k plan at the 401k Help Center. For retirement planning resources, in general, and more about 401ks, see About's Retirement Planning Center.
Why Have a 401k Retirement Plan?
There are four main reasons why you will want to consider sponsoring a 401k plan in your workplace.-
A 401k retirement plan demonstrates that you care about and value your employees and want to provide a means for them to plan for their future. According to the Fidelity 401k Web site, experts estimate that "each of us will need between 60 percent and 80 percent of our final annual working income every year that we're retired. Since Social Security typically provides only 40 percent of the average retiree's income, many of us will need to rely on our own savings and investments."
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A 401k retirement plan has tax advantages for the employer and the employee, including tax-deductible advantages for the employer and tax deferred growth for the employee.
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Use the 401k retirement plan to attract high quality employees. According to a survey of 900 of its member companies, determined that 95 percent of them offered a 401k plan. 93 percent of the companies surveyed provide a contribution or some type of match to the employee's individual 401k contribution. Can you afford to ignore this trend and expect to recruit and retain excellent employees?
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The 401k retirement plan helps you retain high quality employees. Your best employees expect the best benefits and pay. Need I say more?
