As a small business owner, you know the importance of attracting and retaining talented employees. One way to do this is by offering a portable 401(k) plan. A portable 401(k) plan is exactly what it sounds like: A retirement savings plan that employees can take with them if they leave the company.
So… what is it, really?
A portable 401(k) plan is a retirement savings plan that allows employees to take their contributions and employer-matching contributions with them if they leave the company. This type of plan is also known as a rollover 401(k) or individual 401(k). With a portable 401(k) plan, employees can continue to make contributions to their retirement savings account regardless of their employment status.
Why should I offer a portable 401(k) plan?
Glad you asked. From top talent to tax benefits, a portable 401(k) plan could be just what your small business needs.
Benefit #1: Improved Employee Retention
Valuable benefit? Check. Valuable benefit that stays beneficial when employees leave? Check and check. This type of plan can be especially attractive to younger employees who may not plan on staying with the same company for their entire careers.
Benefit #2: Increased Employee Satisfaction
Employees appreciate the ability to save for retirement, and a portable plan allows them to continue to do so even if they change jobs. Plus, 401(k) plans have a huge impact on financial wellness, so think of it as a way to show employees you care.
Benefit #3: Competitive Advantage in Hiring
PSA: If you offer a 401(k) plan, you’ll have a competitive advantage when hiring top talent. It’s that easy. And with a portable small business 401(k), your business can be especially attractive to job seekers looking for job that offers comprehensive benefits.
Benefit #4: Tax Benefits for Employers and Employees
Employer contributions to a 401(k) plan are tax-deductible1, and employees can make pre-tax contributions to their retirement savings account. So it’s a win-win for your small business and your employees when tax season rolls around.
Benefit #5: Increased Employee Savings
A portable 401(k) plan can also help employees save more money for retirement. By offering a retirement savings plan with employer-matching contributions, you can help your employees save more money than they would be able to on their own. (And it’s tax-deductible for you.)
Benefit #6: Cost-Effective for Small Businesses
Offering a portable 401(k) plan can be cost-effective for small businesses. There are many affordable options for small business owners to offer a 401(k) – and some of them are even top-rated2. (Hi, we’re Ubiquity.)
While offering a retirement plan can seem like an added expense, it can actually be a really solid option for small businesses. Many providers offer low-cost plans that are tailored specifically for small businesses. Additionally, offering a retirement plan can help reduce turnover costs by improving employee retention, which can save your small business money in the long run.
Benefit #7: Flexible Contribution Options
Portable 401(k) plans offer flexible contribution options for both you and your employees. You can choose to match employee contributions up to a certain percentage, or you can offer your employees a set contribution amount. Employees can also choose to contribute as much or as little as they would like, up to the IRS contribution limits.
Benefit #8: Ease of Administration
Portable 401(k) plans are easy to administer, especially when compared to other retirement plan options like pensions. Many providers offer online administration tools that make it simple for small business owners like you to manage their employees’ retirement plans.
Benefit #9: Opportunity for Higher Contributions
Like all 401(k) plans, portable plans allow for higher contribution limits than traditional IRA accounts. In 2023, the contribution limit for a 401(k) plan is $22,500 for employees under 50 years old and $30,000 for employees over 50 years old. Compare that to the measly $6,500 you’re allowed to save in an IRA! This higher contribution limit can help employees save more money for retirement.
Ready to get started?
Look for a provider that offers low fees, a wide range of investment options, and easy-to-use administration tools… a provider like Ubiquity.
1 Employers with 50 or fewer employees can receive a tax credit for contributing to their employees’ retirement plans. The credit is a percentage of the amount contributed by the employer, up to a per-employee cap of $1,000. The credit percentage is reduced over five years, with 100% in the first and second years, 75% in the third year, 50% in the fourth year, and 25% in the fifth year. No credit for subsequent tax years, thereafter.
2 Decimal, Inc. conducted an evaluation of four small-business 401(k) providers in the marketplace by analyzing independent customer reviews on Google, Trustpilot, and the Better Business Bureau, as reported by unaffiliated contributors on or before September 30, 2022, with a revaluation date of January 12, 2023. The evaluation resulted in a higher score for our company compared to the other providers. We strive to provide excellent service to our customers and appreciate their feedback.
Ubiquity is not a registered investment advisor, and the information provided herein should not be considered legal or tax advice. We recommend consulting with your financial planner, attorney, and/or tax advisor for personalized advice.
