Financial wellness. No longer just a buzz phrase, but a major concern for employees and employers these days.
Recent changes in the job market put more power in candidates’ hands, and employers are feeling the pressure to be more competitive in attracting and retaining talent. Furthermore, there’s a mismatch of supply and demand as both sides struggle to find the right fit.
One solution for business owners is to sweeten their benefits package by adding a retirement plan.
“It’s top of mind for business owners right now,” says Michael Majors, senior director of national retirement sales for Paychex, one of the leading 401(k) providers in the nation, serving more than 90,000 plans. Majors adds that a recent internal survey found 77 percent of Paychex’s clients who started retirement plans in the past few months did so to find and keep good employees. “It’s a dramatically different story compared to past years.”
Paychex, which has been in business for 50 years and has offices throughout the United States, helps small and medium-size businesses address their payroll, human resources, insurance, retirement needs and more.
“You have to stand out in attracting workers right now, and one of the best ways to do that is to offer a retirement plan such as a 401(k),” Majors says. “Our , technology platform, is built to support the needs of growing businesses at a price point that makes sense for them.”
The rush to add the retirement benefit stems partly from the pandemic – a wake-up call for all Americans who suddenly found themselves in a precarious financial situation with a heightened focus on securing their financial future.
“Most people had never experienced a financial shock of this kind , it scared them,” says Majors, who expects a whole new generation of savers to come out of the experience who will work more diligently toward a dignified retirement that they’re otherwise not likely to get from Social Security.
According to 2020 data from the U.S. Bureau of Labor Statistics, only 55 percent of adults participate in a workplace retirement plan. Meanwhile, the U.S. retirement system is in trouble and looking to business owners to be part of the solution while helping entrepreneurs deal with the pandemic at the same time. At the end of 2019, a new federal law — the Setting Every Community Up for Retirement Enhancement Act, better known as the SECURE Act — made it easier and cheaper for small business owners to set up retirement plans for their workers.
California is at the forefront compared to other parts of the country. CalSavers program targets self-employed individuals and workers whose employers don’t offer a plan, giving them an opportunity to contribute to an IRA that belongs to them.
According to California state law, companies with five employees or more must facilitate access to CalSavers or offer a plan of their own to avoid penalties. But while it seems like going through a free program such as CalSavers is the easier option for a business owner, working with a provider such as Paychex comes with tax credits and other benefits the state program does not offer to companies.
“It’s accelerating businesses to say OK, if I have to offer retirement benefits, I want to make sure it is the right one for my business,” Majors says, pointing out that Paychex’s retirement sales are up throughout the country and program retention rates are high.
With COVID as the great accelerator, Majors and his team are getting the attention of business owners. While the world is working remotely, they’re taking advantage of the time they would otherwise spend driving to in-person meetings by instead maximizing outreach efforts to even more businesses.
Paychex makes it simple for entrepreneurs to customize plans and get employees on board through its convenient mobile app. The setup process is as fast as 20 minutes and the plan cost can be as little as a cell phone bill to maintain. Moreover, since Paychex also offers payroll services, there is an opportunity to streamline the process even further.
Craig Silverstein, who oversees the retirement services product offering at Paychex, says many businesses stay on the sidelines when it comes to offering retirement plans “because they think their business is too small and 401(k) plans are too complex,” he says.
“In reality, it’s never too early to start, even if it’s with just a handful of employees. Especially when there’s a battle for talent going on and tax incentives to offset the business owners’ costs. A majority of businesses with less than 50 employees are not offering retirement plan benefits to their employees today. However, we expect to see significant growth in the area as a result of the SECURE Act and as more states launch programs like CalSavers. The more businesses begin to offer retirement plan benefits the more pressure it puts on those that are not currently offering them.” — Michael Majors, senior director of national retirement sales for Paychex
Majors says he expects to see the trend last for the next few years. As more companies start offering robust benefits packages, including retirement, others will have no choice but to follow if they want to stay relevant and comply with government mandates. There’s also likely more legislation ahead as several bills related to workplace retirement programs are circulating in Washington, D.C.
“There’s really never been a better time than right now for small businesses when it comes to starting a 401(k) plan,” Silverstein says. “When you have employees that are supported financially, they perform better in the workplace and they remain loyal.”
