Ask the Expert: What do I need to know about employee retirement plans?

We've all read the reports: there's no telling if Social Security will still be around by the time many of us retire. And even if it is, it's unlikely those funds will allow us to maintain our current standards of living when we leave the workforce. By providing an employee retirement plan for all of your workers, you help promote smart saving and investing, and show that you share a keen interest in their long-term financial future.

Employee retirement plans offer many benefits: tax breaks for employers, tax-free investments and growth until withdrawal, and easy administration, to name a few. But the most overlooked benefit of having a retirement plan is that it's a powerful recruitment and retention tool for your business.

When prospective employees go out on job interviews, one of the most important things they ask about is whether the company offers a 401k plan, IRA, or similar retirement savings plan. It's also one of the benefits that keeps good employees on board instead of seeking out other career opportunities. The reason is quite simple – employees want to make sure the time they invest in a company will allow them to adequately build savings for retirement.

If you're looking to start up an employee retirement plan for your company, here are some important things to keep in mind:

Match employee contributions. By offering to match a percentage of what an employee defers from their paychecks (for example, 50 cents for every dollar up to 6% of salary), you're essentially offering "free money" to workers just for actively building their retirement savings.

Matching helps prevent the need for costly discrimination testing which the government mandates to ensure the plan doesn't favor highly-compensated employees. You can also set a vesting schedule to determine when the employees can keep your contributions: if they leave the company before they're vested, you get the money back.

If the economy impacts your ability to contribute to the plan, you could always suspend matching contributions and then reinstate them when business turns around.

Educate employees on the value of retirement plans. As part of typical plan packages, providers will visit your employees, explain the plan benefits and contribution limits, and take questions. They'll also explain why the program is beneficial to employees and why they should proactively contribute even if the company doesn't match contributions.

Don't fear plan costs. According to a recent Fidelity Investments study, 43% of small business owners forgo an employee retirement plan because they feel that it's too expensive. Many plan providers offer packages that offer multiple investment options and plan administration for just a few hundred dollars per month. It's one of the more affordable benefits you can offer, and as previously mentioned, one that many employees want.

For more detailed information about employee retirement plans, read our comprehensive buyer's guide.

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