Boost Employee Retention: Retirement Plan Strategies for Small Businesses

For small businesses, attracting and keeping great employees can be tough, especially when you’re competing with big companies that offer top-tier benefits.

But here’s the good news: offering a retirement plan is now easier and more affordable than ever, thanks to recent federal legislation.

Whether you’re just getting started or looking to improve your current setup, retirement plans like Safe Harbor 401(k)s, PEO/MEP partnerships, and the benefits unlocked by the SECURE Acts can give your business a competitive edge.

Here’s how to make retirement planning work for your small business.

Why Retirement Plans Matter for Small Teams

You don’t need a big HR department to offer big benefits. A well-designed retirement plan can help:

• Build loyalty and reduce turnover
• Attract better candidates in a tight labor market
• Boost morale by showing long-term commitment to employees
• You stand out against larger competitors

According to a Charles Schwab nationwide survey of 401(k) plan participants, 88% of workers say a 401(k) is a "must-have" benefit, second only to health insurance at 90%.

What the SECURE Acts Mean for Your Business

Two pieces of legislation, the SECURE Act (2019) and SECURE 2.0 Act (2022), were designed specifically to make retirement plans more accessible for small businesses.

Key Benefits:

• Startup tax credits: Up to $5,000 for plan setup, plus $500/year for auto-enrollment
• Ongoing credits: Up to $1,000 per employee per year (for five years)
• Starter 401(k)s: Low-cost, simplified plans for smaller teams
• Auto-enrollment required: Starting in 2025 for new plans – helping increase participation
• Flexible plan options: Like student loan matching, Roth contributions, and easier transitions from SIMPLE IRAs

Bottom line: These laws reduce costs, simplify compliance, and open up high-quality retirement options to businesses of all sizes.

Why a Safe Harbor 401(k) may be Ideal for Small Businesses

A Safe Harbor 401(k) is tailor-made for small businesses that want to avoid IRS testing headaches while offering strong employee benefits.

Why It Works:

• No complex nondiscrimination testing
• Immediate vesting in employer contributions
• Clear, predictable costs
• Boosts recruiting and retention by showing commitment to employees' futures

You choose between matching or nonelective contributions, and your team benefits right away, with no waiting period.

PEOs & MEPs: Easy Retirement Plan Administration

If you don’t want to manage all the compliance yourself, consider working with a PEO (Professional Employer Organization) or joining a MEP (Multiple Employer Plan).

Benefits for Small Business Owners:

• Shared administrative and fiduciary responsibilities
• Lower costs through pooled resources
• Access to large-employer-level plans without the overhead

With open MEPs now allowed regardless of industry (thanks to the SECURE Act), these partnerships make retirement plans much more accessible.

Key Deadlines for 2025 Implementation

If you're planning to implement a retirement plan in 2025, timing is critical.

• For new Safe Harbor 401(k) plans, employee notices must have gone out by September 1, 2025, and the plan must be active by October 1 to qualify for full tax credits and simplified compliance.
• If you're converting an existing plan to a Matching Safe Harbor, you’ll need to file the amendment by November 20, with notices sent by December 1 for a January 1, 2026, start.
• For a Nonelective Safe Harbor (3%), the plan can be updated as late as December 1, 2025, but it requires employer contributions for the full year. Even more flexibility is available if you add a 3% nonelective contribution later in the year, up to 30 days before year-end, though you’ll need to bump the contribution to 4% if you miss the December deadline.

Staying ahead of these dates helps ensures a smoother setup and access to valuable tax incentives.

How to Use Retirement Plans for Retention & Growth

Offering a retirement plan isn’t just checking a compliance box, it’s a strategic investment in your people and your business.

Here’s how to maximize the impact:

• Show you care: Immediate vesting builds trust and loyalty
• Stand out in hiring: Many small businesses skip retirement plans, yours can be the one that doesn’t
• Boost participation: Auto-enroll features and matching contributions encourage long-term saving
• Claim your credits: Talk to your tax advisor to make sure you get all available incentives

What Small Business Owners Should Do Next

• Evaluate your current setup: Don’t have a plan? Running a SIMPLE IRA? Now’s the time to explore Safe Harbor or starter 401(k)s.
• Mark the deadlines: This is critical if you want to go live next year.
• Talk to a provider: Platforms like Guideline, or working through a PEO, can simplify the process.
• Maximize tax credits: You could save thousands in the first year alone.
• Communicate with your team: Promote the new benefit early, builds buy-in and boosts morale.

Build A Retirement Strategy That Retains Talent

You don’t need to be a Fortune 500 company to offer retirement benefits that make a real difference. With simplified rules, generous tax incentives, and flexible plan options, 2025 is the perfect time to level up your small business benefits strategy. Explore helpful insights and resources in our Small Business Essentials Resource Hub to get started.

A Safe Harbor 401(k) or PEO-supported plan can help you attract talent, retain employees, and build a strong company culture, without breaking your budget or your bandwidth.

Ready to explore your options? Contact us today to get expert guidance, find the best retirement plan for your business, and start building a loyal, motivated team.

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