Be In the Know

Subscribe to get our latest content by email.
    We won't send you spam. Unsubscribe at any time.

    When To Offer Health Insurance and Retirement Benefits

    September 21, 2023

    You’ve reached a huge milestone – considering offering benefits to your employees. That’s something worth celebrating because it’s a significant move towards attracting and retaining top talent, so cheers to you!!

    Now, as you venture into the world of employee benefits you’ve probably figured out that not all benefits are created equal. We’re here to guide you through the distinctions between “traditional” benefits like health insurance and retirement benefits, helping you make informed decisions that benefit you, your team, and your business.

    But before we dive into the nitty-gritty, let me first reassure you of this: You are not obligated to provide either of these benefits, even for your full-time, salaried employees. It’s a strategic choice you can make, not a requirement.

    Health Insurance: Personalized Flexibility

    Let’s kick things off with health insurance, the ideal entry point into the world of employee benefits. Why?  Because health insurance doesn’t have to be the same for each person on your team, and the benefits can be tailored to meet the individual needs of your employees. Health insurance allows for a more personalized approach, and this flexibility extends to your budget, making it a really great option for businesses just dipping their toes into the benefits pool.

    Not sure where to even begin with health insurance? A stipend is a great place to start. You offer your employee a set amount to specifically allocate towards healthcare, and they can use that stipend however they see fit (under the healthcare umbrella, of course). For some that might be a gym membership, for others it might be therapy. But the beauty is that they get to decide, and you’re supporting their wellbeing with very little legwork on your end. 

    Retirement Benefits: Uniformity and Regulatory Compliance

    Now, let’s shift our focus to retirement benefits, where things work a bit differently. The key distinction here is the uniformity requirement. If you decide to provide retirement benefits for one employee, you must extend this benefit to all eligible employees. These plans have to be consistent across all eligible team members, leaving no room for customization based on individual preferences or needs. While this uniformity streamlines administration, it limits personalization options.

    Regulatory bodies, such as the Social Security Administration (SSA), keep a close eye on retirement plans to ensure compliance. So, while offering retirement benefits may not be overly costly, it does come with added compliance responsibilities.

    A Tax Break for Business Owners

    When offering retirement benefits, there’s an intriguing angle to consider: potential tax benefits for business owners. If you, as the CEO, opt for a retirement plan like a 401(k), you could reduce your tax liability. 

    The best part? Offering a 401(k) doesn’t have to break the bank. Managing such a plan can cost as little as $80 per month, and you have the flexibility to choose whether or not to provide a match – which, by the way, isn’t as expensive as you might imagine! For instance, a 3% match for an employee with a $100,000 salary amounts to just $3,000 per year.

    State-Mandated Retirement Plans

    It’s also crucial to be aware of state-specific requirements. In many states, small business owners must offer their employees the option to contribute to a state-mandated retirement plan. While this doesn’t bring additional financial costs for you, it does demand extra time and administrative effort.

    The Decision: Where to Start?

    As you contemplate the choice between health insurance and retirement benefits for your small business, our recommendation is to start with health insurance. Why? Because it allows for individual customization, involves fewer stipulations, and can work within just about any budget.

    Once you’ve established a health insurance plan that suits your budget and meets the diverse needs of your employees, you can then consider adding retirement benefits. 

    Our Employee Cost Calculator for small businesses is the perfect tool to start wrapping your head around how much these benefits will cost so you can start building attractive compensation packages. The calculator features customizable taxes, insurance, and benefits allotments, and allows you to easily evaluate expenses for full time or part time employees.

    Remember, as your business grows, your benefits strategy can evolve, providing even more incentives for your team and solidifying your position as an attractive employer. So, take that first step, and watch your small business thrive with a strategically crafted employee benefits program.

    Listen Now!

    Links Mentioned

    Employee Cost Calculator






    Copyright © 2020-2023 Paradigm people operations Consulting. All Rights Reserved.



    Stay in the Know

    Subscribe to stay up to date with small business news and compliance for your online business.



    Disclaimer: NOT PROFESSIONAL ADVICE. All information provided on this Website and/or in its Services is for educational and informational purposes only. This information should not be taken as legal advice, professional advice, opinions, or recommendations for you and your business. It is strongly advised that any information purchased or seen on this site is reviewed by an attorney or an expert in the city and state in which you live. No user of the Website or Services should act, or refrain from acting, on the basis of information included on this Website or Services without first consulting legal counsel in the relevant jurisdiction.

    CLIENT portal

    Template Shop