Hartford Business Journal

www.HartfordBusiness.com • May 28, 2018 • Hartford Business Journal 21 EXPERTS CORNER 401(k) plans shouldn't intimidate small businesses By Joel Johnson A s most are aware, Fortune 500 companies and other larger businesses tend to offer 401(k) retirement plans, or something similar, to their employees. They recognize it as a valuable tool to invest in and retain the best possible talent in the workforce and usually have the means to afford such an investment. But what about small businesses, many of which don't understand the complexity and liability of offering such plans to their employees? Is a 401(k) retirement plan something that should be offered? In the Hartford marketplace, where employers often find it difficult to keep workers from re- locating to other, more vibrant areas, the answer is a resounding "yes." In fact it's an understatement to call it simply a good idea. It is practically a must. A 401(k) is a plan that allows employ- ees to save pre-taxable money through payroll deduction, to ultimately be used for their retirement. Employees receive a tax break to make such a contribution today, and the money grows tax-de- ferred until it is withdrawn, particu- larly for retirement. One hidden advantage of a 401(k) plan is that by having it come directly out of the employee's paycheck, it is a regular, automatic occurrence. That is significant — when it's done for the employee on an automatic basis (much like taxes taken from a paycheck or healthcare benefits), they don't ever really feel a strain. Mechanically, a 401(k) can have up to three basic components — what the employee puts in, some level of match from the employer, and a discretion- ary profit-sharing contribution that the employer can decide on each year (extra money over and above the match). The latter two are optional. But from professional services industries to more "grey-collar" jobs in manufacturing and machinery to sales to technology-based companies, 401(k) plans or similar employer-offered retirement plans are very important. Why? Three reasons: 1. It helps to attract the best em- ployees. 2. It helps to retain the best employees. 3. It is simply the right thing to do, giving employees the opportunity to save for retirement one day. So if it's such a no-brainer, why are so many small employers still hesitant to offer 401(k) plans? The simple answer is lack of appropriate information about what offering these plans actually entails, and some of the misconceptions that have grown up around them over the years. One of the most common miscon- ceptions is employers have to match contributions made by employees on a regular basis to their retirement accounts. While employers certainly can offer some level of matching funds, they by no means have to do it. They could institute a 401(k) plan just to allow employees to save their own money on a tax-advantage basis. Adding to the benefits of a 401(k) plan is they are relatively simple to set up and administer; for smaller busi- nesses most 401(k) providers also have internal administrators, so employ- ers only have to deal with one person. There is a cost associated with having that outside administrator establish the plan, but that is a manageable challenge. As with many offerings that are fa- miliar to large businesses but foreign to smaller ones, the key is not to be intimi- dated by the idea of offering employees 401(k) retirement plans. The truth is there is nothing difficult about it. Not only do such plans come with built-in advice and resources on how to manage them, but having them as part of a benefits portfolio will go a long way towards not just recruiting the best workers, but retaining them for the long term. Joel Johnson is the managing partner at Wethersfield-based Johnson Brunetti, a retirement-planning firm. HARTFORDBUSINESS.COM POLL LAST WEEK'S POLL RESULT: Will Connecticut adopt legalized sports betting in the wake of the Supreme Court's recent decision to allow it? NEXT WEEK'S POLL: Should CRDA use eminent domain to acquire a key, privately owned block of the XL Center? To vote, go online to hartfordbusiness.com BIZ BOOKS Strategies for long-term business growth By Jim Pawlak "If You're in a Dogfight, Become a Cat — Strate- gies for Long-Term Growth" by Leonard Sherman Dogfights in business occur because busi- nesses doggedly pursue market share in product segments that consumers view as undifferentiated. In attempts to main- tain or grow "bragging rights" in com- moditized products, they actually throw money away and watch ROI decline. Sherman addresses the "why" of market-share dogma: Managers be- lieve they must "compete aggressively to protect their core business." This results in the constant introduction of minimally incremental product improvements, many of which have no cost-benefit value in the eyes of con- sumers. By protecting their turf, they don't see greener grass. Case on-point: General Motors lost over $20 billion in the European car market since 2000 while its market share there eroded over 10 points. In 2017, GM finally decided it had lost the dogfight and sold its European operations to PSA Group, owner of the Peugeot brand. While PSA Group "won," it bought a severely wounded dog. Conversely, Ford Motor adopted a "cattitude" approach to the European market. It hunted for "prey"(i.e. identi- fied what was missing) and shifted production to small commercial ve- hicles and autos that could be built on existing American platforms. Sherman says long-term growth and profitability can be achieved by focus- ing strategy on three imperatives: 1. "Continuous innovation — not for its own sake, but to deliver … 2. Meaningful differentiation — rec- ognized and valued by consumers, enabled by … 3. Business alignment — where all corporate capabilities, resources, incentives, and business culture and processes are aligned to sup- port a company's" strategy. 6.1% No 93.9% Yes READER COMMENTS: "You can bet on it!" "Of course. The extra income will let them spend more!" "Sports betting does not benefit the people who can least afford it so I hope that it isn't adopted in Connecticut." Joel Johnson Jim Pawlak Book Review

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