401(k) 101: What companies should know
The future can be scary for employees to think about. The distance to that point seems so far, yet workers know the importance of planning ahead. People want their employer to play a part in the upcoming years as well. According to a study from Glassdoor, 31 percent of employees would value retirement planning over a pay raise. With the assistance of their organization, what’s to come may not seem as overwhelming to workers as it once was. Let’s take a look at one of the most popular retirement options – 401(k)s – and what all employers should know:
It’s mutually beneficial
Workers want to feel supported within their company. They hope their employer has their well-being in mind when making decisions regarding benefits offerings. Providing retirement assistance aids both businesses and their employees. People will feel more at ease, comfortable and valued if their organization takes actual steps toward advocating for their future, making them more satisfied in their role and within the workplace as a whole. Companies benefit from this feeling of gratitude, as happy workers are more likely to stay on board for longer periods of time and the perk itself can help businesses recruit higher quality candidates.
Towers Watson found more than 75 percent of new hires said employer-sponsored retirement programs gave them a compelling reason to stay and 85 percent of respondents said they hoped to remain with the company until they reach retirement age. This perk, therefore, is mutually beneficial: employees are happier and businesses can improve their recruitment and retention rates.
The ability to match
Employers have a lot of options when deciding how to implement a retirement program. Some companies offer a match – 50 cents for each dollar up to 6 percent of pay is the most common, according to U.S. News and World Report. But others aren’t able to provide that perk, especially upon the program’s introduction. No matter what a business provides, there’s always room for improvement. Organizations that don’t match may decide to do so in the future, while other companies may increase the pay percentage limit over time. Either way, workers will be appreciative that their employer is invested in their financial well-being in the first place.
2016 contribution limits
Every year, the IRS releases information and requirements related to retirement and pension plan contribution limits. In 2016, the majority of data related to 401(k) plans remained unchanged from 2015 due to a lack of cost of living adjustment. It’s crucial for employers and their workers to be aware of the following:
- The elective contribution limit for employees participating in 401(k) plans is $18,000.
- The employee catch-up contribution is $6,000.
- The defined maximum contribution limit – from both employees and employers – is $53,000.
Providing retirement options is an important benefit companies should offer their employees. While the savings alone are a large perk to workers, the provisions can also help businesses improve satisfaction, recruitment and retention rates within their workplace.
Whether you need help choosing a 401(k) partner or want to integrate your 401(k) provider’s system, SBS has you covered. SBS’ solutions include 401(k) administration, integration, interface and upload services.