Employers

3 ways to sell a 401(k) benefit to your boss (and on-the-fence employees)

Ashley Herd

07.May.2024

Key takeaways:

Offering a retirement benefit may help companies recruit and retain employees, while also providing potential tax benefits.
Partnering with a 401(k) platform can make it easier for companies to administer a retirement benefit, with features like automatic onboarding and payroll integration.

The data doesn't lie — 401(k) plans are good for employers and employees. Research shows that 70% of employers agree that offering a retirement benefit has positively impacted their ability to recruit and hire talent. Additionally, 93% of employees say a company's retirement benefit would influence their decision to join a company. If you work in HR, these figures probably aren’t surprising. But if you have ever had to convince your boss of the importance of a retirement benefit, you’re certainly not alone.

If you've found yourself combating objections — from "it's too expensive!" to "employees care about other things!" — this guide is for you. In this post, we'll cover ways to help your boss and your team understand the full value of a 401(k) plan.

3 ways to sell a 401(k) plan to your boss

Depending on who you're pitching to, you may have to convince your boss that a 401(k) is worth the money, time, and energy it can take to set up a new plan. Here are three key aspects to help you make a compelling case:

1. A 401(k) could cost less than your boss might think, thanks to tax benefits

When CEOs and finance teams analyze their balance sheets, each line item has the potential for savings. This is where the strategic implementation of a 401(k) plan becomes not just a tool for employee engagement, but also can be a savvy financial move.

You get to share the good news — not only are employer contributions to 401(k) plans an investment in employees, but they may also be deductible on the company's federal income tax return, lowering their overall tax bill.If startup costs are a concern, even more good news — retirement plan tax credits are available that can make offering a 401(k) more affordable. In fact, eligible companies could qualify for up to $16,500 in tax credits when starting a new 401(k). For many businesses, these credits could cover 100% of new plan costs for the first three years.¹

2. A 401(k) can help your team recruit and retain talent

You might hear from your CEO, "Will our employees even care about a 401(k)?" You know they do — and you're right, so tell them in a language they'll understand: data.

Over two-thirds of employers agree that offering a retirement benefit has positively impacted their ability to recruit and hire talent. Further, not offering a 401(k) plan could make or break a candidate's impression of a company. Half of candidates would turn down a job offer from a company that did not offer a retirement benefit, and 78% of employees would not recommend their employer as a good place to work if they didn't offer a retirement benefit.

If you're losing out on talent — from candidates who decide not to accept without a retirement benefit, to employees leaving for a company that does — you could spend more money on longer search periods, or in costs replacing and re-training talent, than you would spend building a compelling benefits package. Turnover costs are already high — up to $2.6 million per year for companies with +100 employees that offer annual salaries of $50,000. Not offering a 401(k) plan could make an expensive problem even worse.

3. Plan administration can be a breeze with the right partner

If your boss is worried that offering a new 401(k) feels too complex, it's not without good reason. Retirement benefits have often been associated with heaps of paperwork and hours upon hours of administrative tasks. But that's no longer always the case — especially with the right partner.

Opting for a 401(k) platform can make managing a retirement benefit easier, with features like automatic onboarding and payroll integration. Automatic onboarding can help streamline how employees sign up, reducing paperwork and ensuring that as soon as employees are eligible, they can enroll. This not only could save time, but can also encourage stronger participation rates. Payroll integration can make it even easier by making automatic deductions and contributions each payroll run.

If there's greater concern around potential compliance challenges, you can look into a Safe Harbor 401(k). These plans are designed to automatically satisfy certain IRS nondiscrimination tests, providing peace of mind that the benefits are equitable across the company, from executives to entry-level employees.²

These 3 points can help assure your boss that offering a 401(k) not only helps to attract and retain talent, but creates a culture of financial responsibility within the company. It sends the signal that your organization is invested in the long-term success and stability of its team.

How to position a 401(k) to on-the-fence employees

Once your boss is on board, it’s time to switch gears and focus on setting your team up for success. An important metric to monitor is your plan’s participation rate. How many employees are using your company’s 401(k)? Helping your team understand the value of your company’s 401(k) plan may take some time and education. Here’s how to get it done:

1. Understanding the value of a 401(k) match and total compensation

Offering a 401(k) match can be a great way to incentivize employees to participate in your plan and signals that you're invested in their long-term financial well-being. Yet research shows that some employees fail to take full advantage of their employer's 401(k) match, which is akin to leaving money on the table

This is where the idea of total compensation comes into play. Most employees could tell you their salary without batting an eye, but the idea of total compensation might be a bit more illusive. An employee’s total compensation includes their base salary, as well as the value of any benefits the company offers, which may include bonuses, commission, paid time off, insurance, child care, and of course, a retirement plan.

By educating your employees about their total compensation package, including your company’s 401(k) match, you can provide a more comprehensive understanding of the full value of the benefit.

2. Make it easy – from enrollment to participation

When employees have enough on their plates, the last thing they need is a complex benefit enrollment process. When evaluating your company’s retirement plan, ask yourself:

How easy (or difficult) is it for employees to sign up?
Can employees easily track how much they've saved for retirement?
Can employees change their contribution rates independently?

At the end of the day, a complicated retirement benefit may prevent your employees from participating. Finding the right 401(k) platform can help make this simple for you and your team.

With Guideline, employees can set up their 401(k), track their progress, and access educational resources from an intuitive dashboard or mobile app. (And coming from someone who knows HR, trust me — spending less time on benefits administration is something that can make both employers and employees happy.)

3. Education can go a long way

Understanding the ins and outs of a 401(k) plan isn't second nature to everyone. As an HR professional, it's important to help educate your team. Working with a 401(k) platform can help do that by providing resources to help explain how even small contributions can have long-term benefits. It's about painting a clear picture — one where today's contributions can lay the groundwork for a secure and comfortable retirement, for the employee and their family.

If you need help getting started, here are some resources you can share with your team:

As you can see, the success of introducing a 401(k) plan in your organization can mean demonstrating its mutual benefits: a cost-effective, competitive edge in talent acquisition for employers, and an investment in your employees’ financial futures. Clear communication, simplified enrollment, and education on its long-term advantages are the keys to effectively selling a 401(k) to both your boss and your employees.

Disclosures:

Ashley Herd is not a client of Guideline. Views may not be representative of others. Guideline compensated Ashley Herd for this blog, which can create a conflict of interest. See additional disclosure here.

This is for informational purposes only. It should not be used as a substitute for specific tax, legal and/or financial advice. Investing involves risk and investments may lose money. You are advised to consult a qualified financial adviser or tax professional for further details and guidance.

¹ This content is for informational purposes only and is not intended to be taken as tax advice. Please consult a tax professional to determine what types of tax credits or deductions your company is eligible to claim.

² In general, Safe Harbor 401(k) plans automatically satisfy Top Heavy requirements. One exception is for plan years in which the employer makes discretionary contributions (such as profit sharing contributions) in addition to Safe Harbor contributions. Removing Safe Harbor contributions mid-year will also require plans be subject to all compliance testing. All plans of related entities must be administered by Guideline in order to provide compliance testing.