Many companies will be forced to give raises in 2025. In these post-COVID, high times many companies are struggling with employee retention and/or increased employee cost causing pricing pressures on their goods or services. A great idea to solve both problems is to consider converting part of your raises into 401(k) matching contributions.

Consider this: Wage increases are essentially a 100% vested employer provided benefit, but without the same tax advantages of making higher contributions to a 401(k) plan:

• You have to pay higher payroll taxes on wages than plan contributions.
• You can set up contributions such that in order to receive the full budgeted raise they will have to increase their participation in the plan.
• You get to keep 0% of the wages paid should employees leave in the short term.
• If you need to spend more money on employees you can make them stay longer to keep all of the raise – essentially paying less for employees who come and go quickly.
• 82% of 401(k) Plans offer a match, with an average match of 4.5% – so if you offer less you are behind the market, but if you offer more, you’re more attractive.

If you are planning to give raises during 2025, talk to your friends at Alliance Benefit Group. We can show you ways to split your raises between wages and matching contributions to their 401(k) plan to:

• Lower the overall cost of the raise
• Increase plan participation in your plan, which could help solve another problem if you are having to give refunds every year.
• Greatly increase employee plan balances, which will help them retire on-time. This can be a huge potential cost saving to employers.

Let Alliance Benefit Group show you how it could work for your company by contacting your Client Relationship Manager or ABG Sales Rep.