Let’s face it; it’s probable that most of your employees are anxious about their retirement. Heck, as someone likely administering the 401(k) plan and participating in it, you may be anxious about it as well.
The thing is, you’re not alone; 59% of Americans are worried about their retirement.
I’d be willing to bet you’ve got a couple friends who’ve off-handedly mentioned their companies’ cushy 401(k) match. You may have gotten a little jealous, which is completely understandable, who doesn’t want free money?
And it probably got you thinking: how do I convince my boss to offer a 401(k) match?
My goal here today is to provide you ammunition to help persuade your boss to offer 401(k) matching. And to paint the picture of what it takes to roll out that match, once your boss gives you the thumbs up.
Three 401(k) Matching Reasons: Why your boss should offer a 401(k) match
- **Attracting and retaining great people. **All else equal, this may be the deciding factor between a candidate choosing one company over another. The data shows its importance, 37% of employees stated their defined contribution plan as a reason to stay at their current job. By structuring the 401(k) matching so it vests later in an employee’s tenure, the 401(k) match has been proven as a consistent way to attract and retain great people.
- **The tax benefits. **Matching contributions are deductible on the employer’s federal income tax return. The great news is a company can deduct up to 25% of all participants’ compensation.
- **Your competitors are doing it. **For the first time in 20 years the most common 401(k) match increased to $1 for $1 on the first 6% of employee deferrals. Prior, a match of $0.50 per $1 on the first 6% was the most popular.
Pro tip: a lot of times, leadership teams want to see hard numbers before considering a company match.
Now, assuming all goes well with your boss, let’s hypothesize that your boss is convinced and wants to rollout a employer match. Success!
Next, you’ll have to figure out how to implement your brand new company match. At ForUsAll, we’ve identified four key ingredients to a simple and seamless rollout:
Calculate the cost of different match levels. This can be a little tricky. In short, you designate a cap on what percentage of the employee’s salary you will match and at what rate.
For example, let’s say you decided to match $0.50 on the $1 up until 6%. If your employee were to defer 6%, you as the employer would be contributing 3% (6% x $0.50).A lot of times companies want to know what other companies in their industry are offering as a match to help guide their decision.
Determine the match vesting schedule. This depends on the goals of your organization and the nature of your industry. There are three main types of vesting: immediate, graded and cliff.
**Immediate: **The employee owns 100% of the match and the employer is not permitted to take it back for any reason. In 2015, 40% of employers elected for immediate vesting – this is the most generous of the options.
Cliff: One of the least generous schedules. Employees are required to work a specific period of time before they’re able to claim their matches. If your cliff is three years and you quit at two, no match for you. We’ve seen employers use this as an incentive to retain talent.
**Graded: **The goldilocks of vesting schedules. After every year of service your match vests a little more. The maximum length is six years.
**Automate company match calculations and contributions. **Ask your 401(k) provider to connect with your payroll platform and turn on automatic company match calculations. This way you have one system that is always tracking changes in employee deferral rates and calculating the correct company match based on that. And with full payroll integration, you won’t need to do a thing, since the proper amounts should automatically end up in employee 401(k) accounts.
Show off the 401(k) match to employees.You’ve leveled up your 401(k) game and it’s something to be celebrated. The fun part is getting the word out to all of your employees since the company match is a great motivator for people of all ages and job types to get into the 401(k) plan. At ForUsAll, we use have a special DAVE module that will help explain how your company’s 401(k) plan works and how to get the most of the match.
Congratulations on thinking about offering a company match and working to win your boss over with your idea. The 401(k) company match can be an incredible motivator and help even more employees save for retirement — something the team at ForUsAll is passionate about.