Legendary Chicago adman Fairfax Cone often lamented: “The inventory goes down the elevator every night.” He knew that his employees were his most valuable resource and the key to his company’s competitive edge.
Even in the depths of a lingering recession, attracting and retaining the best and the brightest is a key issue for businesses. And nowhere is that more true than for the small business or the entrepreneur hoping to launch the next Apple.
A retirement plan for employees can give your company a leg up on the competition in the war for talent.
“To attract and retain truly outstanding employees a retirement plan is certainly an attractive offering,” said Marilyn Capelli Dimitroff, president of Capelli Financial Services in Bloomfield Hills, Mich., who is repeatedly named one of the nation’s top 100 wealth advisers by Worth Magazine.
Retirement plans are especially helpful to small businesses and startups trying to attact the best employees. Yet, almost 72 percent of workers in small companies have no retirement plan available through their company, according to a report released this year by the Small Business Administration’s Office of Advocacy.
For top-drawer talent, “the expectation is that there will be a plan available,” Dimitroff told BusinessNewsDaily.
Small businesses have an extensive menu of options when it comes to offering retirement plans to employees, including Solo 401 (K), Simplified Employee Pension Plans (SEP), Savings Incentive Match Plan for Employees (SIMPLE) and profit-sharing plans.
“When you look at a matrix of the options and requirements, you pretty much zero in on the one that’s right for your business within four minutes,” said Peter Calfee, president of Calfee Financial Advisors in Chagrin Falls, Ohio. SEPs, he said, are the easiest to set up and offer business owners the greatest flexibility in if, when and how much they contribute.
Regardless of the option a business selects, retirement planning should figure in the owner’s business calculus from the get-go, said Dimitroff. “In looking at all business plans it should be considered right from the start,” she said.
And retirement is a conversation that owners need to have with their employees from the beginning so that they are able to understand that these programs are a form of deferred compensation with real value. It’s not a magic entitlement that materializes out of thin air. Both the company and employees are taking less today to pay for tomorrow.
How to start
Dimitroff seconds that recommendation. “Start by interviewing folks who are knowledgeable,” she said. “It’s something that most small business owners don’t deal with on a day-to-day basis. It’s very helpful to seek expert help.”
The biggest time commitment, Dimitroff said, is looking at the options and understanding the benefits, drawback and fees. Actual program implementation is relatively straightforward.
Retirement program management, however, is a different story. While in theory it’s possible for small business owners to manage programs and investments for their employees, it’s usually a discipline that’s outside their core competency and comfort zone.
Calfee relies on a third-party plan administrator for the plan for his own company.
“It makes it cleaner and easier,” he said. “I wouldn’t want to do this in the kitchen and think I’m Mario Batali,” referring to the famous chef and media personality.
Dimitroff agrees. “The skills that make you a good entrepreneur may not equip you to manage investments on an on-going basis,” she said.
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