Looking to offer your employees a Retirement Savings Plan? You've got some options.
There is a growing movement underway to help ensure more Americans are working toward a financially secure retirement—and for good reason.
Currently, more than half of Americans do not have sufficient savings to retire, according to the Center for Retirement Research (CRR) at Boston College’s 2020 National Retirement Risk Index (NRRI). Though the index rose a few percentage points during the pandemic, the retirement savings gap was growing long before 2020, spurring government and businesses to expand and innovate retirement savings vehicles for employees.
For small and mid-sized businesses, there are increasing opportunities to participate in 401(k) plans, which in the past may have been too difficult or expensive to create and maintain on their own. For example, companies in the same industry can join a multi-employer plan (MEP) 401(k), which allows them access to a Fortune 500-level retirement plan by pooling assets and sharing administrative costs. G&A Partners has provided this service for years, and in a movement to make retirement savings options available to more companies, we recently launched a new pooled employment plan (PEP) 401(k) option. The PEP does not require participants to be in the same industry, therefore businesses of all types and sizes can join forces to share in costs and benefits.
“The ultimate goal is to increase opportunities for all companies and their employees to have 401(k) retirement funds,” said Tilisha Conley, G&A Partners Retirement Plan Manager. “This is a huge advantage for small and medium-sized businesses as it gives many who do not currently provide employees with a retirement savings option the ability to offer a plan.”
There’s a 401(k) Retirement Option for Your Business
A 401(k) plan is a flexible retirement savings plan in which employees participate through automatic payroll deductions that are invested in the plan’s offerings—typically an assortment of stock and bond mutual funds. Your company can add value by matching a portion—or all—of your employees’ contributions, which helps them save for retirement and builds goodwill with your workforce.
Adding a retirement savings option to your company’s benefits plan also gives you an edge when it comes to recruiting talent and retaining employees. And while some companies may find it difficult—and sometimes expensive—to operate their own 401(k) plan, pooled and multiemployer plans can help address those pain points.
Pooled Employment Plans (PEPs)
The pooled employment plan (PEP) 401(k) option came to life through the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. PEPs offer small businesses and employees many of the same benefits as a traditional (larger) 401(k) plan by providing access to a wide variety of investments that are not typically available through a small plan—or no plan at all.
Conley said for years G&A’s multiemployer plan (MEP) 401(k) has delivered clients cost savings, retirement options, and employee satisfaction, and G&A is pleased and excited to expand services for clients with the new PEP 401(k) option, which became effective by law in January 2021.
“We recognized the benefits PEPs offered to clients who were not able to take advantage of the MEP 401(k),” she said.
Both MEPs and PEPs require a plan sponsor to organize and run retirement plans. G&A fills the sponsor role and performs administrative duties for member companies, known as “adopting employers.” This benefits smaller companies not equipped to handle the costs, liability, and paperwork required to run a retirement plan.
“We take on administrative tasks so our clients can focus on their business,” Conley said.
How the SECURE Act is Reforming Retirement Savings
The SECURE Act’s overall goal is to enact a series of reforms that make saving for retirement easier and more accessible for Americans. According to Investopedia, the highlights of the SECURE Act include:
- Creating the Pooled Employer Plan (PEP) as a new way for unrelated employers to collectively participate in a professionally-administered defined contribution plan.
- Making it easier for small businesses to offer their employees 401(k) plans by providing tax credits and protections on collective Multiple Employer Plans.
- Allowing retirement benefits for long-term, part-time employees.
- Removing maximum age limits on retirement contributions, formerly capped at age 70½.
- Raising the required minimum distribution (RMD) age to 72 from 70½.
- Allowing penalty-free withdrawals up to $5,000 from retirement plans for the birth or adoption of a child.
- Allowing penalty-free withdrawals of up to $10,000 from 529 education savings plans for the repayment of certain student loans.
Congress began working on the next iteration of the SECURE Act - The Securing a Strong Retirement Act of 2020 - which was proposed after the COVID-19 pandemic exacerbated the nation’s existing retirement crisis. However, the bill was killed in Congress on December 31, 2020.
401(k) Options Level the Playing Field for Employers of all Sizes
Whether you have 10, 100, or 1,000 or more employees, your goal is to offer the best retirement plan available, so your team members have options when it comes to planning for life beyond the workplace. Traditional, pooled (PEP) and multiemployer (MEP) 401(k) offer multiple advantages for your employees and your business.
- Grow retirement savings through before-tax (tax-deferred) contributions.
- Grow your retirement savings even more if your company matches a percentage of your contributions.
- Contribute up to $19,500 in 2021 with an additional $6,500 catch-up contribution allowed for those 50 or older.
- Reach up to $58,000 (or $64,500 after age 50) in contributions from all sources in 2021 (employer and employee combined).
- Form lifelong savings habits by making automatic contributions from your paycheck.
- Invest your retirement savings in stocks, mutual funds, money market funds, savings accounts, and other investment vehicles.
- Take your 401(k) contributions and earnings with you when you leave an employer and transfer it to another retirement savings plan.
- Provide a streamlined, progressive opportunity for employees to grow their retirement savings.
- Attract and retain talented employees. Many job seekers rank a quality retirement plan on par with health benefits, company culture, and salary.
- Provide an employer match that your company can afford and that appeals to your employees and quality candidates.
- Earn a tax deduction for your contributions to employees’ retirement accounts.
- Employ the auto-enroll feature (that allows employees to opt out), which significantly increases participation in your 401(k) plan.
G&A Partners, one of the nation’s leading professional employer organizations (PEO), is ideally suited to help your business navigate employment issues and initiatives such as diversity, equity, and inclusion. Let our experts take the HR, payroll, and benefits administrative burden off your shoulders so you can focus on growing your business. To learn more, schedule a consultation with one of our knowledgeable business advisors.