How to Compete Using Benefits

As companies grow and develop, holding onto top talent can become critical to your success. In today's competitive market, employees have choices—and they're evaluating not just salary, but the benefits package employers offer. 

The Power of Benefits

Offering an expanded benefit package can be one of the most effective ways to remain competitive in the talent marketplace. While health insurance and paid time off are generally expected, a robust retirement plan is often one of the most valued benefits employees seek when choosing—and staying with—an employer. 

Retirement Plan Key Features

When evaluating retirement plans, there are several features that may help your plan stand out from others: 

• Plan Design Elements — Automatic enrollment capabilities can dramatically improve participation rates, while immediate vesting on employer contributions demonstrates your commitment to employees from day one. Other elements, like including a Roth 401(k), can be attractive to some employees.
• Investment and Education Components — Target-date funds can simplify decision-making for employees who might otherwise feel overwhelmed. Coupling these with financial educational resources can help employees feel more comfortable about their decisions.
• Economies of Scale Solutions — Multiple Employer Plans (MEPs) allow smaller businesses to pool resources with other companies, potentially accessing investment options and administrative efficiencies typically available only to larger organizations. Professional Employer Organizations (PEOs) can provide similar advantages, but there are limitations to consider, too.¹

The Evaluation Challenge

While these features can make your benefits package more attractive, evaluating retirement plans involves complex considerations around fiduciary responsibilities, cost structures, investment lineups, and regulatory compliance. The nuances of plan administration, vendor relationships, and ongoing oversight requirements can be difficult to navigate without some professional insight.

Professional Guidance Makes the Difference

If you're considering enhancing your current retirement benefits or implementing a new plan, having a financial professional explain the pros and cons of your options can help as you look to make informed decisions that align with both your business objectives and your employees' needs.

Other Factors to Consider

The regulatory responsibilities for plans can be a bit overwhelming for some. For example, when discussing a Roth 401(k), employers must explain that to qualify for tax-free and penalty-free withdrawal of earnings, Roth 401(k) distributions must meet a 5-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawals can also be taken under certain other circumstances, such as the owner's death. Employer matching is pretax and not distributed tax-free during retirement. 

^{1. Business.com, February 2, 2024. "Professional Employer Organization Pros and Cons"}