By Ed Avis
At Franz Reprographics in Minnesota, a delivery driver who has been with the company for 43 years is retiring in December with a hefty 401K that will let him enjoy retirement comfortably.
At Business Document Solutions in Norfolk, Virginia, the four-year-old 401K program already has a $300,000 balance.
And at Memphis Reprographics in Tennessee, the eight employees are part of a Simple IRA program that will advance their financial status to a higher level.
These three APDSP members decided that setting aside a few dollars for their employees’ retirement is worth the cost.
“This program is building wealth for our employees, rather than everyone just living paycheck to paycheck,” explains Chris McNally, owner of Memphis Reprographics. “Our staff love it. We have a very dedicated team who love working here, and the culture – including the benefits – is a big part of that.”
In the Majority
About 60 percent of APDSP members provide some kind of retirement plan for their employees, according to a member survey held in September. Among those offering a plan, 82 percent have a 401K or IRA plan that employees control, and which the employer contributes to. About 13 percent offer a 401K or IRA plan but do not make contributions on employees’ behalf. The remaining 5 percent have a traditional pension plan for their staff.
“Our average employee has been here probably 20 years,” says Bruce Franz, co-owner of Franz Reprographics, which has locations in Minneapolis and Rochester, Minnesota, and Sioux Falls, South Dakota. “I think our benefits package has been a key part of retaining these people.”
Employer Contributions
In each of the three cases above, the employer matches employee contributions up to 3 percent of the employees’ pay at 100 percent. At Business Document Solutions, owner Bryan Leydet also makes discretionary bonus contributions above the 3 percent in some cases.
With the 401K programs at Business Document Solutions and Franz Reprographics, employees choose from a range of options at different levels of risk. The Simple IRA program at Memphis Reprographics also provides options, but not as many as the 401K plans.
“Each employee has the ability pick and choose – they can take T-bills or aggressive European stocks,” Leydet says, explaining that the contributions are pre-tax, so the benefits are more than the growth in the investment itself.
Each of the businesses above has a waiting period before employees can join the plan. At Memphis Reprographics, employees are eligible to join the program after they’ve been there 90 days. At Business Document Solutions and Franz Reprographics, there is a one year waiting period before employees become eligible.
The time before an employee is fully vested in the plan – meaning they fully own the employer contributions – varies, too. At Business Document Solutions, the vesting increases by 20 percentage points each year, so after five years in the plan the employees are fully vested. At Franz Reprographics and Memphis Reprographics, employees are fully vested as soon as they begin participating.
Working with Financial Advisor
It is possible to run an employee retirement program using an on-line system, and McNally did that at first. But he says he learned that employees found it frustrating and were contributing the minimum amount, so he switched to a program with a live financial advisor.
“It’s so much easier to have the financial advisor who can answer questions,” McNally says. “He counsels the employees individually, and has helped them increase their contribution. At first everyone was just doing the 3 percent, but now some are doing 10 to 15 percent. The advisor has shown them how much they can make in the long term if they increase their contribution.”
McNally says the cost to the company to have the live advisor is greater than when they used just an internet program, but he finds it worth it. “It’s offsetting the time I would have to put into managing this myself,” he says. “And if I have questions, I can call someone who is licensed. It’s great.”
Keeping Employees Happy
All three of the owners interviewed for this story say they feel their retirement plans help them retain good employees.
“From a recruitment and retention piece, it has definitely been successful,” McNally says. “It’s not like we are able to offer six-figure salaries on the front end, so it’s nice to be able to offer something like this.”
Details About Plans
The IRS provides a convenient publication about how to choose a plan for a small business, including details about the differences among 401Ks, IRAs, and other plans. It can be downloaded by clicking here: https://www.irs.gov/pub/irs-pdf/p3998.pdf