More small businesses have begun offering 401(k) retirement plans as a result of a relatively strong labor market, tax incentives and state requirements, The Wall Street Journal (subscription) reports.
What’s going on: States including California, Oregon and Illinois are requiring private-sector employers that don’t offer retirement plans to give their workers access to state-sponsored plans—but many firms are now choosing the often more costly option of opening their own 401(k)s.
- “In those three states, companies have adopted 401(k) plans at a faster rate than the national average, according to an analysis being released April 14 by the Pew Charitable Trusts.”
Why a 401(k)? One of the main advantages of a 401(k) is that it lets those under age 50 save as much as $22,500 a year, far more than the $6,500 allowed by Roth IRAs, the vehicle most state programs use.
- 401(k)s have “also been aided by tax credits Congress authorized and expanded in 2019 and 2022 that lower the cost for many smaller employers of starting a 401(k) plan and making matching contributions to workers’ accounts.”
Need help? The NAM has created a group plan to make it easy and affordable for manufacturers to offer plans that meet all requirements in their states. To learn more about the Manufacturers Retirement 401(k) & Savings Plan, go here.