A retirement plan can help small to mid-sized businesses stay ahead of the competition in the fast-paced business world. Thanks to new legislation, a new type of retirement plan, a Pooled Employer Plan (PEP), can potentially have a transformative impact on companies that adopt it. While the following story is only an illustration, it shows the exciting possibilities that can result when a business embraces this new retirement plan option. Join me in a story that showcases the power of PEPs and how they can positively transform businesses, paving the way for a brighter future.
This story is about a company that started small but had big ambitions. BrightTech Solutions was once a small to medium-sized business in the technology sector. Despite their growth, they struggled to attract top talent. During interviews, when the job seekers inquired about the retirement benefits, the interviewer attempted to address their concern by pointing out that BrightTech offered higher salaries than the average. But the company still was struggling to fill skilled positions. This left them at a disadvantage compared to their competitors, who offered comprehensive employee benefits. However, everything changed when BrightTech Solutions decided to invest in their employees’ future by implementing a retirement plan.
Before offering a retirement plan, BrightTech Solutions struggled to attract skilled professionals who valued financial security. Candidates often chose other companies with retirement benefits, leaving BrightTech with limited options and talent acquisition challenges. The lack of a retirement plan also increased turnover rates as employees sought better benefits and retirement options elsewhere. Due to the lack of a retirement plan, employees had less loyalty to the company.
Furthermore, BrightTech Solutions was missing out on valuable tax advantages of a retirement plan. When an employer offers a retirement plan that allows the employee to make pre-tax contributions, it has two tax benefits. First, the employee gets tax-deductible contributions that are tax-deferred. Second, BrightTech was missing out on lowering its tax obligations. Employers pay less FICA for employees when employees make pre-tax contributions to a retirement plan.
As a sidenote, after-tax contributions can be made available to employees too. But that option does not reduce FICA obligations for employers.
BrightTech employees also experienced financial stress and anxiety about their long-term financial future. The absence of retirement benefits left them feeling uncertain and less engaged with their job.
However, things changed when BrightTech Solutions decided to invest in their employees’ future by offering a retirement benefit. They realized the transformative power it could have on their business. After providing retirement benefits, BrightTech Solutions discovered a remarkable fact. They found how prevalent retirement plans are because almost every new experienced employee wanted to transfer their previous retirement plan to BrightTech’s new plan. The retirement benefit became a significant factor in attracting highly sought tech workers.
With the retirement plan in place, employee turnover rates decreased too. The workforce felt valued, motivated, and loyal to the company. Brightech was also able to add a vesting schedule which meant that if employees left early in their careers, they would lose part of the employer’s retirement contribution. The retirement benefit became a symbol of BrightTech’s commitment to their employees’ long-term financial security, fostering a positive and dedicated team.
The tax advantages associated with the retirement plan allowed BrightTech Solutions to optimize its financial resources. The reduced tax liabilities provided the company with additional funds to match employees’ contributions.
Plus, the company was able to take advantage of tax credits for some of the expenses of the plan in the first three years.
The employees’ financial wellness improved as they contributed to their retirement savings. Financial stress diminished, allowing them to focus on their work with renewed enthusiasm. The retirement plan profoundly impacted their overall well-being and job satisfaction.
Succession planning became more streamlined and efficient with the retirement benefit. The company cultivated a culture of long-term thinking, ensuring a smooth transition when key employees retired. Critical knowledge and expertise were preserved, guaranteeing business continuity and minimizing disruptions.
The Implementation of a Pooled Employer Plan (PEP)
BrightTech Solutions decided that a Pooled Employer Plan (PEP) would be the easiest way to offer a retirement benefit. The PEP allows them to join other small businesses to reduce the need for in-house administration, reduce overall costs and streamline plan operations. The PEP also provided access to a broader range of investment options and fiduciary services, enhancing the retirement benefit’s overall effectiveness.
The Future of Retirement Plans
The story of BrightTech Solutions’ success demonstrates the transformative power of a retirement plan. Investing in employees’ long-term financial security improves overall well-being and contributes to the company’s success. As the workforce continues to evolve, retirement benefits will become an increasingly important tool for attracting and retaining top talent.
Implementing a Pooled Employer Plan (PEP) is also a significant development in the retirement benefit landscape, providing small businesses access to the same benefits and services as larger companies. As more small businesses join forces through PEPs, retirement benefits will become more accessible and effective.
The narrative of BrightTech Solutions serves as an hypothetical illustration of the substantial influence a retirement plan can have on a small to mid-sized business. Offering the benefit through a Pooled Employer Plan (PEP) shows how easy it is to transform a business by providing highly sought-after benefits. By telling the story of how BrightTech invested in its employees’ long-term financial security, it shows the remarkable turnaround possible for many companies. A retirement plan can attract top talent, reduce turnover rates, and foster a positive and dedicated workforce. The retirement plan can enhance employee well-being and job satisfaction and optimize the company’s financial resources through tax advantages.
As the business landscape continues to evolve, retirement benefits will play an increasingly critical role in attracting and retaining top talent. Small businesses, like BrightTech Solutions, can leverage PEPs to level the playing field, providing the same benefits and services as larger companies. PEPs offer a promising future for retirement benefits, making them more accessible, effective, and aligned with the evolving needs of businesses and employees.
Transform Your Business with Retirement Plans
Do you have a small or medium-sized business looking to transform employee benefits and gain a competitive edge? Explore the power of retirement benefits, including the innovative Pooled Employer Plan (PEP) option. Take the first step towards a brighter future for your workforce and business by talking with a retirement plan advisor
If you’re seeking personalized guidance in reviewing your company’s retirement plan, schedule a call with Van Richards, ChFC. Simply click below to set up a brief call.