Check in with your co-workersAre you the only one in your company who wants a 401(k)? If so, your chances aren’t great. Make sure other employees understand the benefits of a 401(k) and that they’d be on board with you asking about it as a new offering. It’s much more convincing to be able to say, “5 out of 6 people on our sales team say they’d definitely contribute to a 401(k)” or “our head of marketing mentioned that it’s been difficult to hire without a 401(k)” as opposed to “I wish our company had a 401(k)”. Need help convincing your co-workers? Here’s some recommended reading to pass along to them:
Talk to the right personIt’s probably best to start the discussion about a 401(k) plan or a 401(k) employer match with your direct manager. They may have insight about upcoming changes to benefits plans that you may not be aware of, and they are the ones who represent employee interests to the company owner or senior leadership. If they’re also involved in hiring in any way, you may also want to ask them how a lack of a 401(k) affects the effectiveness of their recruiting. If your manager doesn’t respond or isn’t willing to bring your ideas to leadership meetings, make time to connect with the HR manager in your company, the person who handles the administrative side of the business (COO, general manager, or accountant), or the business owner (CEO or founder), preferably in that order. Make sure to work your way up and not jump right away to the business owner, as to not take anyone by surprise or put anyone in an awkward position.
Express your gratitudeWhen you broach the topic of offering a 401(k) or adding an employer match as part of the benefit, start out on a positive note: express your gratitude for the benefits that are already in place. Offer some personal insight as to how the healthcare coverage, transportation program, or childcare subsidy has helped improve your experience as an employee. From the standpoint of an employer, benefits plans have an impact on the bottom line, both in terms of employee retention and hiring new employees. If you’re talking with your company founder, manager, or another representative, they want to know that their effort to deliver positive programs for employees hasn’t gone unnoticed.
Provide dataIf you want your request to be taken seriously, do your research. Don’t show up at a meeting or start a conversation about adding a 401(k) plan or increasing the employer match without having some data to back you up. What kind of data should you gather?
- Competitor data: Do some research about companies of a similar size in your industry—what are they offering their employees for retirement benefits? What are typical 401(k) plans in your geographic location? (Check out Glassdoor.com for reviews, or look up benefits offerings on competitor websites.) According to survey data referenced by the Society for Human Resource Management (SHRM), when it comes to employer 401(k) match, “the most common match today is dollar-for-dollar on the first 6 percent of employee deferrals.”
- Employee surveys: Has your company conducted a company-wide employee survey related to benefits? Check the results and highlight any ways in which a 401(k) might improve those results, or might address issues that came out of the survey. No recent surveys? You might consider suggesting that your company conduct a survey—here’s a free benefits survey template.
- Retention rates: Have people left your company in pursuit of other jobs that offered a 401(k) plan? Maybe some potential hires didn’t join the organization because there wasn’t a retirement plan in place. You may not be privy to this information, but if you are, be sure to mention it as an illustration of how not having a 401(k) could be impacting the talent pool your company can attract and retain.
- Responses to common objections: Not enough time? Not enough money? Here are some hard facts to help explain why it’s easier than expected to get a 401(k) even as a small business and why a 401(k) match is worth it.
- Legal requirements: Will your state soon be legally required to offer a 401(k)? Learn more about that here.
Offer to helpIf your manager or leadership team expresses interest in your idea about a 401(k) plan or the suggestion to add an employer match, offer to research what options exist:
- Conduct research on your own by talking with other small businesses to see what 401(k) providers they use; then schedule time to meet with those providers
- Create a team of people to help tackle the research; divide up the inquiries, meet regularly and work together to draft a summary of your findings
The financial benefits of a(n increased) 401(k) matchIf your company already has a 401(k), and your request is that they also offer a match or increase the current match, start by reading this article and pass it along to your HR manager: Small Business 401(k) Match: Why It’s Worth It. It explains that the key benefit of a good 401(k) match is the tax savings. Both employers and employees receive tax benefits with a matched 401(k) plan. Employees can save for retirement tax-free, and the money a company contributes to employees’ 401(k) plans is tax deductible, which provides an ongoing tax benefit to employers. Other benefits include easier compliances testing, which the article explains as well. How does this compare to a bonus or a raise? With a typical bonus or raise, employees pay income and employment taxes on money they receive. And employers pay Social Security, Medicare, unemployment and other significant payroll taxes when they offer an employee a raise or a bonus. If you and your employer do the math, you’ll see that the money in a match can have more financial impact than a one-time bonus or salary increase. As part of your discussion, share information with decision makers about baseline numbers when it comes to the most common 401(k) employer match contributions. According to Benchmark Your 401(k) Plan, the average company contributions are as follows:
- Forty (40) percent of plans match $.50 per $1.00, up to a specified percentage of pay (commonly 6%)
- Thirty-eight (38) percent of all plans match $1.00 per $1.00 up to a specified percentage of pay
- Forty-three (43) percent of employees said “the company match was the primary reason they participate in the plan.”