By: Andrea Masucci – Director of Retirement Plan Services
CEOs are faced with many new challenges from managing growth expectations, to reducing technology expenses, to finding and hiring talented new employees where the post-recession talent pool has dried up to a puddle. Keeping your company running smoothly depends upon knowing what the increasingly mobile and transient workforce of young professionals are seeking. One of the top 3 demands of this workforce in 2016 is expanded employee benefits. Employees are seeking perks, and these perks add up to be the difference that increases your employee retention and reduces the hidden costs not hitting your profit and loss statement associated with employee turnover.
One of the obvious benefits that keep top young professional talent at your company includes the benefits offered through a 401(k) plan. How can you make your 401(k) plan as healthy as the organic foods this crowd craves? Nothing says “healthy company” like a Safe Harbor 401(k) plan with managed investment portfolios.
A Safe Harbor 401(k) plan has a minimum of a 3% employer contribution that is 100% immediately vested. In 2016, an employee under the age of 50 years old can contribute from their paycheck up to $18,000 in a 401(k). Along with the benefit of their contributions being tax deductible, you as an employer, take a tax deduction for the 3% employer contribution to each employee in the plan. Limits for employees and employers aggregated contributions can be maxed out at $53,000 for 2016. What additional benefits do Safe Harbor 401(k) plans offer to your individual 401(k) account as a company owner? It allows you and your highly compensated employees (anyone with a salary of $120,000 or more or own 5% of the business) to make the maximum salary deferral contributions to their own accounts even if the other employees want to make limited or no contributions to the 401(k).
However, with today’s busy young professionals and volatility of the markets, will they be uncomfortable taking a gamble on which asset classes to place their investment? Will they be equipped with the knowledge of a top ranked investment manager to know what percentage to allocate to each asset class for their maxed out 401(k) contributions? Recent studies show by offering Managed Investment Portfolios, employees earn up to 7% more on average than do-it-yourselfer investors1.
By offering Hamilton Capital Management’s Dynamic Asset Allocation Model Investment Portfolios through your companies’ 401(k) plan, you won’t be left uncomfortable watching your 3% Safe Harbor employer contribution get invested by employees in high risk, low return investments due to unfamiliarity with investing or chasing market performance.
1 Data taken from 2011 Quantitative Analysis of Investor Behavior, DALBAR, Inc., March 2011
Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Hamilton Capital Management, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Hamilton Capital Management, Inc. is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice.