Issue link: https://read.dmtmag.com/i/575161
3 Powersports Business Close-Up ® 4 01(k) S O LU T I O N S Nathan has observed that some powersports dealerships are losing good employees who are migrating to car dealerships. One reason is that many car dealerships offer 401(k) plans, whereas most powersports dealerships do not. According to the National Automobile Dealers Association, 92% of U.S. automotive dealerships offered 401(k) plans as of 2011. However, the 2013 Powersports Business Market Data Book reports that only 23% of powersports dealerships offer any sort of retirement plan. The 2015 U.S. Bureau of Labor Statistics report says that retirement benefits are available to 66% of private industry workers in the U.S. If you own a multi-store operation and you're interested in attracting and retaining top industry talent, it may be time to consider sponsoring a 401(k) plan. THE 401(K) PLAN—A HIGH-POWERED RETIREMENT SAVINGS VEHICLE A 401(k) plan is an IRS-qualified retirement savings vehicle established by an employer for the benefit of its employees. A 401(k) plan allows employees to contribute a portion of their wages to an individual account on a tax-deferred basis to save for retirement. The employer may choose to contribute to the 401(k) plan on behalf of the employees. The last two decades have seen a rise in 401(k) plan popularity, particularly within smaller companies with fewer than 200 employees. This is partly because pension plans have become less common and also because Social Security seems less secure. According to Nathan Fisher, it is important for small businesses that want to remain competitive to offer some sort of retirement plan to their employees. IS A 401(K) PLAN RIGHT FOR YOUR DEALERSHIP? According to Nathan Fisher, there are unique characteristics of a 401(k) plan that set it apart from other company-sponsored benefits and make it a smart business decision for established businesses of all sizes. Nathan meets with business owners across the country spanning a broad range of industries, and the decision to offer a 401(k) plan typically comes down to a combination of the following objectives: • Tax-deferred retirement savings for business owners and their employees THE NUTS AND BOLTS OF A 401(K) PLAN There are several features a business owner should consider when adopting a 401(k) plan. With the help of an experienced plan provider, each of these features can be used as a tool to accomplish various business goals. The best options for each business will vary based on the structure of the business and make up of their employee base. A few basic options are listed below: Employer Contribution This is the amount the employer contributes to the plan on behalf of each employee. An employer contribution can often help dealerships increase employee loyalty and retention. It may also help the owner maximize his/her own savings. There are 3 main types of employer contributions: Match: The employer matches the individual employee contributions up to a specified percentage. This can be discretionary, which allows the employer to decide whether or not to match from year to year. Profit Sharing: The employer chooses how much to contribute to the plan (out of profits or otherwise) each year, including making no contribution. Safe Harbor: The employer makes a required annual contribution to the plan to ensure the plan remains compliant. Eligibility Companies can choose the timing of when new employees become eligible to participate. Companies often implement a short waiting period to reduce plan turnover and to increase plan attractiveness. Auto Enrollment For dealerships looking to increase employee participation, this plan feature automatically enrolls eligible employees. The alternative approach is allowing employees to "opt in" to the plan. " " "e lack of a 401(k) plan is probably not the only reason employees leave. But if you're look- ing to attract and retain top talent, people know what a 401(k) plan is, and they want to be a part of a company that offers it." -Nathan Fisher, Managing Director Fisher Investments 401(k) Solutions HOW DOES TAX-DEFERRED SAVING WORK? Money saved in a 401(k) plan is contributed pre-tax. This means the money is taxed when it is withdrawn, rather than in the year it was earned. For example, an employee earning $100,000 annually who contributes $18,000 a year to the 401(k) plan reduces his/her taxable income to $82,000.