small business retirement plan design

Business owners often adopt best practices when it comes to a new product or service. They should take the same approach toward small business retirement plan design.

It’s easy to assume that all plans are the same. They are not. That’s why design matters.

In our experience, no matter the size of your business, there are certain features that are crucial to the success of  your employee retirement savings plan.

Those crucial small business retirement plan design ideas include:

  • Automatic enrollment. According to Vanguard, the average participation rate in 401(k) plans with automatic enrollment is 91%. In contrast, just 28% took part in 401(k) plans without auto enrollment. As more people join a company’s 401(k) plan, more are likely to stay.
  • Automatic contribution increases. We suggest coupling automatic enrollment with automatic increases in contributions. Saving more money is better for both the employee and the employer. Account balances build faster, supporting retention.
  • Roth 401(k) access. Including a Roth 401(k) option in your retirement plan will make your benefits package more attractive. A tax-free Roth can provide real value to certain retirement savers. 
  • Safe Harbor. Electing a Safe Harbor plan design means your company offers a matching contribution to your employees’ savings to encourage participation. In addition, highly compensated employees can max out their own contributions.
  • Eliminate the loan provision. Thoughtful employers want to ensure their employees treat their retirement plan as a long-term savings vehicle. Eliminating loans encourages long-term thinking that delivers the best results for your employees’ retirement balances.

Better plan design, better business

Ultimately, a better retirement plan design leads to employee happiness. Employee satisfaction, in turn, promotes better recruiting and supports employee retention. 

As with any discussion about small business retirement plan design, all of the above should follow thoughtful conversations with your plan advisor and provider to ensure your goals are met. At BetterK by Rebalance, we are happy to help!

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