Considering a 401(k) for your business that provides your employees with access to crypto? Read on to learn more about the benefits and risks.
Boosted savings rates, built-in tax advantages, and expanded investment choices are all potential benefits that participants could see with access to crypto in their 401(k) plans. Though the ways that sponsors can benefit from this feature are less obvious, they are just as important.
By giving their employees access to modern investment choices like cryptocurrency, sponsors can use their 401(k) plans to boost their ability to find and retain top-notch talent. In addition, a 401(k) with exciting features could help increase plan participation rates, particularly among younger people, and thus help ensure plan health. Here are just a few reasons why crypto access in your business’s 401(k) plan could help you gain a competitive advantage.
Particularly in the last few years, the job market has shifted dramatically, and employers must find ways to compete for new talent as members of the workforce become more comfortable with career changes. Benefits packages are an excellent way to show that your business can provide value to your employees, and a modern package that includes a 401(k) with cryptocurrency might just do the trick. 401(k)s in particular are important to prospective employees. In fact, 60% percent of people surveyed say retirement benefits are a key consideration for a job prospect, so it’s important to maximize this recruitment tool with modern, in-demand investment options.
Benefits packages are an excellent way to show that your business can provide value to your employees, and a modern package that includes a 401(k) with cryptocurrency might just do the trick.
Because 3 out of 5 people would like access to crypto in their 401(k)s, employers who offer their staff this investment option are getting ahead of a growing trend, and demonstrating that they’re listening to what today’s employees want. Cryptocurrency is also particularly popular among younger generations. Millennials lead the pack, with 49% of them already holding some crypto assets. Sponsors who add cryptocurrency access to their company’s 401(k) could invigorate their recruitment efforts by offering something that can attract more up-and-coming talent.
Decrease Turnover and Increase Productivity
The changing job market hasn’t just made it more difficult for employers to win new prospects, it’s also made it harder to retain them. With more options for employment available, particularly now that remote work has become mainstream, many employees are more comfortable re-joining the job hunt if a job doesn’t work out. High turnover rates can deal a serious blow to growing businesses, however. The costs of onboarding new employees can run up to 213% of an employee’s salary, and productivity tends to dip during training. With a modern 401(k) plan that meets employees’ needs, business owners can be proactive in helping their workers feel satisfied and valued.
A key concern among many employers who are considering adopting 401(k) plans is whether or not they’ll see sufficient participation rates among their employees.
Increase Participation Rates
401(k) plans can benefit an employer because they are able to deduct plan costs from their year-end business expenses. However, 401(k)s are only an advantage to employers if employees value the benefit. Without high participation rates among rank and file employees, plans can easily fail key regulatory tests that ensure the plan is benefiting employees equitably. These are known as non-discrimination tests, and the penalties for failure can result in taxable distributions to highly compensated employees, which will make these employees unhappy, or cost employers money. Because of this, a key concern among many employers who are considering adopting 401(k) plans is whether or not they’ll see sufficient participation rates among their employees.
However, by offering plans that meet the needs and demands of employees, sponsors can help encourage more of their staff to enroll and contribute. According to a recent survey, 54% of millennials and 56% of Gen Z say crypto is already part of their retirement strategy, despite most plans not offering crypto access. Therefore, employers who offer their staff this feature could see increased plan participation rates, and be better equipped to maintain their plans.
Our solution includes a core lineup of ESG and traditional investments, plus a self-directed cryptocurrency window, powered by Coinbase Institutional.
Cons: Volatility, Knowledge Gaps
When offering an asset like cryptocurrency, employers should carefully consider their options. Cryptocurrency is known to be a volatile asset, and thus the risk of loss is high if portfolios aren’t properly balanced. In order to protect their staff from making unwise investments, employers can work with their plan providers to determine appropriate investment caps and other guardrails.
Because cryptocurrency is a relatively new asset class, and it’s entirely new to the 401(k), lack of participant knowledge can lead to poor investment decisions from your staff, or even low plan participation rates. Robust education and clear disclosures can help your employees to assess if cryptocurrency is right for them, and help them make sound decisions. ForUsAll provides ongoing support for participants through email, webinars, and an interactive education portal to help participants make the right decisions for themselves.
How to Offer Cryptocurrency in your 401(k)
ForUsAll makes it easy for businesses of all sizes to offer access to cryptocurrency through their 401(k) plans. Our solution includes a core lineup of ESG and traditional investments, plus a self-directed cryptocurrency window, powered by Coinbase Institutional. ForUsAll employs a digital asset screen designed to exclude cryptocurrencies that exhibit high risks of fraud, have no known use-cases, or that have a high likelihood of being deemed unregistered securities as generally understood today. Built for growing businesses, our low-cost plan includes automated plan administration, payroll syncing for every participant, 44 discrete compliance checks per payroll, disclosures, notifications, documentation, audit assistance, and more. Participants receive guidance and education before investing in crypto, and their allocations are capped at 5% of their plan balance plus 5% of ongoing contributions, in order to guard against undue risk. ForUsAll is trusted by hundreds of businesses across the United States and serves over 65,000 employees. Contact us today to find out more about how we can help you offer your employees a 401(k) they’ll love.