If you are a small business owner, creating a 401k plan is essential. Not only will it attract and retain top talent, but it can also provide valuable tax deductions. You can even manage the plan right from your smartphone. Whether you have a team or a handful of employees, a 401k plan can help you make informed decisions.

A 401k Plan is a Must for Small Businesses

Many small-business owners have found that offering a 401k plan to employees boosts employee engagement and retention. Employees who feel invested in their company are more loyal, engaged, and willing to offer suggestions. In addition, one-quarter of small-business owners said they decided to offer a 401k plan because their employees had asked for it. After all, one of the most common complaints from departing employees is that they were not provided with adequate retirement benefits.

Setting up a 401k plan for employees isn’t difficult if you follow the right steps. The IRS website has step-by-step instructions to help you set up your plan. A standard profit-sharing 401k plan lets employees set aside pre-tax or after-tax retirement funds. Employers can also choose whether to match or not match employee contributions. Employers can also set a vesting schedule for their employees.

Offering a 401k plan is an important part of attracting talented employees. But it would help if you also remembered that there are no one-size-fits-all plans. Choosing the wrong combination of contribution features can cost your small business thousands of dollars and hours of effort. Luckily, some tools allow you to customize your plan to fit your unique business.

It Attracts and Retains Top Talent

In the current job market, competition for top talent is extremely high. Offering a competitive retirement plan is one way to stand out from the competition. In addition, many survey respondents believe that retirement plans are an important tool for employee retention, and more than half of them believe that their retirement plans are important tools for employee attraction and retention.

A great 401k retirement plan will demonstrate to top candidates that your company is committed to them. This will enforce your credibility and establish a company culture that looks out for employees. As a result, many top candidates will receive multiple job offers, and a 401(k) plan can be the difference between a successful and unhappy hire.

In addition to retirement plans, businesses should offer health benefits and perks. These benefits will increase employee satisfaction and loyalty, as well as productivity. According to a Glassdoor survey, health care benefits and retirement plans are the top three benefits employees seek in an employer.

It Provides Tax Deductions

Small businesses can take advantage of several tax benefits when offering their employees a 401(k) plan. For example, they can claim a 50 percent tax credit on the startup costs of their plan. This credit is good for up to $5,000 in setup and administrative expenses.

Small business owners can also claim a tax break on matching contributions. In addition, they can claim their contribution as an ordinary business expense up to 25% of covered payroll. Finally, small businesses can customize their plan design by implementing vesting schedules. More details are available in our guide to 401(k) matching.

Small business owners can also benefit from a Tax Credit for Small Employer Pension Plan Startup Costs. Small businesses with 100 employees or less can use this credit to offset the costs of a 401(k) plan. This tax break can save employers up to $500 per year over three years, which is about $1,500 in reduced tax liability.