There comes a time for every small business where decision-makers look for ways to make the employee benefits options more enticing. This is done by either adding new benefits or improving the existing offerings, which could include a 401(k).
Small businesses can struggle when it comes to recruiting top talent if they are up against a large corporation for the same candidate, considering retirement benefits are the next most important employee benefit, after healthcare. The ability to offer a 401(k) option for employees shows forethought and continued investment in the employee and their future.
401(k) plans are powerful tools to help promote financial security for an employee’s retirement years. A number of different plan options exist. It is up to the employer to decide which option fits their organizational needs best.
Automatic Enrollment Plan
A plan in which employees are automatically enrolled and default investments are set unless the employee elects otherwise.
Employers elect whether or not to make a contribution on behalf of the participants, to match an employee deferral or both.
Safe Harbor Plan
Including several kinds of plans not subject to annual benefits testing (required with a traditional 401(k) plan). However, employees in these plans must receive a certain level of employer contributions.
Once a plan has been selected, adopt a written document that will serve as the basis for plan operations going forward. Then, it will be important to maintain reliable accounting of plan activity to help track contributions, earnings and losses, investments, expenses, and participant distributions.
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