What everyone needs to know:
- Nothing is mandatory.Offering a retirement plan is voluntary for employers; participating in a retirement plan is voluntary for employees.
- The marketplace is in early stages.The online marketplace only lists retirement savings plan options available through the marketplace, and, to date, lists just seven plans through two providers. It’s important to remember that there are other options to saving for retirement in addition to the plans listed in the marketplace.
What employers need to knowWhile many small businesses think of employee retirement plan as an expensive administrative burden, businesses that do offer a plan not only support the health of their employees and communities – they also support their own bottom lines: Employees are less likely to leave companies that offer retirement savings plans and are 15 times more likely to save for retirement, according to the Employee Benefit Research Institute. Employer contributions to retirement savings plans are tax-deductible, up to certain limits, which can lower the corporate tax burden while helping employees grow their savings tax-free.
Since more than half (56%) of Washington households struggle to set aside money for retirement and an equal number (55%) are anxious about retirement security, according to FINRA and the AARP, these plans can increase financial capability and help more state residents adequately prepare for retirement. When employees enjoy more support and less stress, productivity increases while absenteeism decreases, and that helps a business’s bottom line.
Businesses can consult with their tax adviser to determine if they are eligible for a refund of administrative set-up costs with a Retirement Plans Startup Costs Tax Credit. The goal is to make it easy for businesses to offer retirement savings plans and easy for employees to sign up – a win-win for Washington.
The Employer Resources section includes information on plan requirements, workplace financial wellness, investment advisors, tax credits, and more.
What employees need to knowFor employees who do not already have a work-sponsored retirement plan option, the Retirement Marketplace can help them get started but is not an exhaustive listing of all retirement savings options. Likewise, if employees feel they are not already saving enough through an employer plan, they can supplement workplace retirement savings with an individual account.
All of the plans on the marketplace are verified and approved by Washington State officials, and the financial services providers listed cannot charge more than 1% in total annual administrative fees to those who enroll. The plans must also undergo an annual review and renewal process.
Interested workers can review plans, choose and customize the one that best fits their needs, and enroll through the provider’s website.
In addition, employees should take note of the following:
- Employees can take a guided tour of the site to receive plan recommendations and compare all plans side by side;
- Worker contributions are portable, so they can move from job to job prior to retirement;
- The site has options for small businesses and individuals, including the self-employed, sole proprietors, and gig workers;
- Calculators such as FINRA’s Retirement Calculator can help employees estimate how much they will need to save for retirement;
- Questions related to sign-up and plan details are managed by the retirement plan provider, not the state Marketplace.
Investment options and moreSo far, it’s not a complete marketplace. Presently, the Retirement Marketplace offers seven retirement plan options through just two companies: Finhabits and the Saturna Trust Company.
- Finhabits’ Roth IRA plan: Employees can contribute after-tax funds and pay no taxes if the funds are held until age 59½ or later; annual income must be below $135,000.
- Finhabits’ Traditional IRA plan: Employees contribute pre-tax funds via automatic contributions; withdrawals are taxable.
- Saturna Trust’s Profit Sharing plan:Employers determine how much employees can contribute and what the amount is based on; employees don’t make their own contributions.
- Saturna Trust’s Solo 401(k) for the self-employed: Self-employed workers can receive similar tax benefits to a traditional 401(k) plan; this is only for business owners and their spouses.
- Saturna Trust’s Traditional 401(k) plan: Employees contribute pre-tax funds and the employer has the option to make a matching contribution.
- Saturna Trust’s Auto-Enroll 401(k) plan:Similar to a traditional 401(k), this plan automatically enrolls employees with a specified percentage contribution; employees can choose to opt-out or select a different percentage contribution.
- Saturna Trust’s Safe Harbor 401(k): Ideal for companies where business owners and highly compensated employees wish to maximize annual contributions, these plans offer a wider range of investment choices without the testing requirements of traditional 401(k)s.
Financial services providers who would like to be listed on the Marketplace must first be verified by a state-based regulatory agency and then complete the Washington State Department of Commerce Retirement Marketplace application; there is no application fee. The Department of Commerce website offers application information and links for financial services companies.
Simplifying the savings processSimply put, workers are more likely to save for retirement when they have the easy, automatic option of a payroll deduction. Likewise, many small businesses want to offer an option for their employees but struggle to understand the best and most affordable options in the sea of retirement savings plans.
Washington’s Small Business Retirement Savings Marketplace, created through the 2015 Engrossed Substitute Senate Bill 5826, aims to make it easier for everyone to save for the future and reach their retirement goals.
With Human Interest, you can get an affordable, full-service 401(k) or 403(b) plan for you and your employees in just a few minutes. Want to hear more? Click here to learn more about our pricing or the over 1,300 small-to-medium businesses and their more than 35,000 employees that we are already helping save for retirement.