Vol 4: Offering a 401(k) to Your Restaurant Staff
(Yes, restaurants). We caught up with entrepreneur/investor Jason Young to talk small business and quickly found ourselves in unfamiliar territory: retirement plans.
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TL;DR
You might think that a 401(k) is something just for giant companies. We’re going to look at four common misconceptions of 401(k)’s, paired with entrepreneur/investor Jason Young’s wealth of knowledge, to share why they might be a key for your food business.
It isn’t complicated to offer a 401(k) to your team. There’s an app.
You don’t need $401k to offer a 401(k), it’s terrible government branding.
Having a 401(k) for yourself and your team could lead to everyone being able to buy a home one day. Interested?
Quickly, What a 401(k) is:
A savings plan offered by employers that allows employees to save and invest a portion of their paycheck before taxes are taken out. The money in a 401(k) account can grow over time, helping employees build a fund for their retirement.
Misconception 1: 401(k)’s Are Only for Big Corporations
Reality: Small businesses, including restaurants, can and do offer 401(k) plans. In fact, setting up a 401(k) plan can be great for restaurants in tough hiring climate. It helps attract and retain employees in a space with high turnover and not a lot of hiring options. "There are a lot of people who will probably have never had a 401(k),” Jason says, “(they) don't know that it's a benefit.” Offering a retirement plan in the restaurant space can signal that you’re an employer who cares about the well-being of your team in the short and long term.
You don’t need a huge team to do it either. All you need is one employee and a few minutes to set it up. See Misconception #2…
Misconception 2: 401(k)’s Are Hard to Set Up
Reality: While the thought of setting up a retirement plan might seem daunting, it’s not nearly as hard as trying to fill seats at your restaurant on a rainy night. Jason told us that technology has made managing 401(k) plans much more straightforward than in the past. Many providers that are easily google-searchable offer streamlined processes specifically designed for small businesses. Even if you’re in the kitchen or on service all day, the new 401(k) providers will make it relatively easy. Here are a few of the providers Jason recommends:
Misconception 3: 401(k)’s Are Costly for Your Business
Reality: There's a common belief that offering a 401(k) is a significant financial burden for a business. 401(k) just sounds expensive. Jason let us know that 401(k) refers to the tax code, not $401,000 (fun fact, and terrible branding). Jason put it clearly:
"The cost to you as an employer is minimal,”
With basic plans costing around a thousand dollars per year, the fees are mostly covering the monthly subscription for the online providers.
Another key Jason let us in on: these costs are tax-deductible, offering additional financial benefits. For instance, the SECURE Act offers a tax credit to small businesses to help with the costs of starting a 401(k) plan.
Misconception 4: 401(k)s Aren’t Worth It
Reality: In the competitive restaurant industry, providing a 401(k) can differentiate your business as a desirable place to work. Additionally, helping employees with their long-term financial health can improve overall job satisfaction and team loyalty.
The value of offering a 401(k) goes beyond financial returns and retention. Jason stresses the importance of helping employees build wealth,
"this solution literally can make the difference between your employees being able to retire one day or not."
Good, important stuff.
What to do Now
If an hour of set up and ~$90/month is within your budget, continue.
Share this 401(k) with your team and ask, is this something you want?
Take a look at the providers like Guideline and set up an intro call with them.
Reply here if you have questions, we’ll do our best to share more of Jason’s knowledge.
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