As the labor markets continue to evolve, business owners and employers are grappling with the pressing question of how to better attract, reward, and retain employees. The age-old benefits like health insurance, vacation time, paid time off (PTO) and standard retirement benefits, are now regarded as table stakes.
Business owners are now required to get more creative in how they attract and retain top talent. And, while a good work-life balance and a positive work culture are regarded as important, there still needs to be more considered for key employees. To stay competitive, employers must think beyond these basics and explore innovative ways to stand out in a competitive labor market.
The Challenge for Highly Compensated Employees:
A company 401(k) is always a great start for retirement. But what happens when highly compensated employees max out contributions too soon? Highly compensated employees often face limitations when it comes to retirement savings, especially within traditional 401(k) plans. The 2023 contribution limit for 401(k) stands at $22,500. While this might be substantial for most employees, it could be insufficient for high earners.
Consider this scenario: A highly compensated executive or business owner who earns $225,000 annually can only contribute 10% of their income to a 401(k). But what if they earn $400,000 or $500,000? A 10% contribution no longer suffices, and they lose out on the opportunity to save more for their retirement.
Beyond the Traditional 401(k):
Business owners who offer additional options beyond the 401(k) can stand out in the crowd and be in a better position to attract and retain key talent. Plans can be funded with employer money, employee money, or a combination of both. Some of these options include:
- Profit sharing
- Phantom stock
- Cash Balance Plan
- Executive Bonus
- SERP / Deferred Compensation Plan
- Split Dollar Life Insurance Plan
Implementing one or more directly depends on:
- How many employees does the employer want to impact?
- How much control does the employer want over the plan – do they want some form of “golden handcuff” to encourage loyalty and longevity?
- Does the employer/employee want deductibility of the benefit now or later?
Every situation should be personalized and optimized to meet the specific financial goals and objectives of the employer/employee. By expanding beyond the traditional 401(k) and benefits, employers can offer a more comprehensive package that not only helps employees earn and save more for retirement but also showcases the organization’s commitment to their overall well-being.
As the labor markets evolve, business owners face the challenge of attracting and retaining top talent. Traditional benefits are no longer sufficient to stand out in a competitive world.
At Prevail, we are committed to helping business owners design more impactful options and plans that cater to the needs of their workforce, driving employee satisfaction, and securing a brighter financial future for all.
Together, let’s navigate the changing labor markets and build a strong, prosperous, and loyal workforce that propels our companies to new heights of success.
Unlock the potential of your workforce with Prevail’s dynamic investment strategies for hiring and retaining key employees. Email us at firstname.lastname@example.org or call 913-295-9500 to get started today.