Want to keep your staff? Increase 401(k) benefits


Headlines around the world trumpeted the phrase “the big quit” to illustrate a rapidly changing and suddenly competitive job market. Eighteen months ago, few of us could say we expected this to happen. Rising wages combined with high quit rates are making it much harder for companies to hire and retain employees, and it’s unclear when things will stabilize. For now, one thing is certain: the job market is more fluid than it has been in decades.

Even before COVID-19, dentists and practice owners often said they were struggling to retain staff. This trend has only intensified since the start of 2020, making retention more essential than ever.

So how can we improve dental practice retention rates? An immediate impetus may be to increase compensation, but there is an alternative proven solution for boosting employee satisfaction and, with it, long-lasting retention: increasing 401(k) retirement benefits and participation.

Why 401(k)?

Here is a great example. An acquaintance of mine recently received a 401(k) raise of 3-7% of her salary instead of a conventional raise. In real terms, his employer pays him 4% more per year, but this money is tax-sheltered, so it is worth more. It’s hard for a competitor to replicate that, so it’s an incentive to stay put.

Also by Scott Puritz:

401(k) Dental Plans: Retire Earlier and Avoid Costly Lawsuits

Cash Balance Plans: Six-Figure Tax Savings for Dentists

Employees who see that their employer cares about them in the long term are much more likely to be satisfied with their role and less likely to leave. A 2018 survey by Willis Tower Watson found that 75% of new hires at a company offering a 401(k) say a retirement plan provides a compelling reason to stay.1 Offering a better 401(k) is not only a great way to protect business and personal income from tax, but also shows that you care about employee happiness, stability, and long-term security.

It sounds simple, but what does it take to increase participation and bring the plan to life?

Education: Make sure your employees know the benefits, not only in terms of your offer, but also in terms of tax benefits. When dues drop or stop, be sure to remind employees that they’re essentially losing a benefit, or if you match, free money!

Employee contract: The more you promote benefits, the more likely employees are to engage. If you already have a matching 401(k) plan but think it’s not enough, consider profit sharing. That way, if you have a successful year, you can shelter taxes and reward staff with additional funds in their 401(k).

Reevaluate current offers: Profit sharing is useful for retention, but it also serves as a goal for new employees. Also look for ways to reduce fees and leave more money in the 401(k) each year.

For many, a 401(k) is seen as a non-financial benefit, but in reality, employees are paid more and enjoy significant tax savings. Most 401(k) plans don’t fit right away, so be sure to talk about the plan to keep people on board until they can join. If you have a good plan, it is unlikely that other employers will be able to offer such generous terms to potential recruits.

If the issue is attracting employees, consider offering a 401(k) match, augmenting an existing match, or offering the benefit earlier in their service. Employees may seek higher salaries, but a competitive pension plan may mean you can offer lower salaries in lieu of benefits.

New plans offer benefits

If you’re not able to match 401(k) contributions or even offer a plan, look at some of the newer offerings on the market. Legacy 401(k) plans offered by payroll providers can incur fees between 1.5% and 3% per year, while newer, more modern plans have fees of 0.7%. A serious reduction in fees means that modern plans are more affordable, but also that employees have even more in their 401(k) at the end of each year, which increases in the future.

Additionally, the new plans include employee training and reporting and management tools. Many of these services incur additional charges on older plans.

Finally, newer plans can serve as a fiduciary for your 401(k) offering, meaning the provider, not the practice owner, assumes the long-term financial risks of running the plan. If the word “fiduciary” is new to you, read my article titled Dental 401(k) Plans: Retire Earlier and Avoid Costly Lawsuits. Even if you have a high participation 401(k) plan in place, be sure to check the fees! Reducing your costs to less than 1% is possible with new plans.

Editor’s note: This article appeared in the May 2022 print edition of Dental Economics magazine. Dentists in North America can take advantage of a free print subscription. Register here.


  1. Working Late: Managing the U.S. Retirement Wave. WTW. December 19, 2018. https://www.wtwco.com/en-US/Insights/2018/12/working-late-managing-the-wave-of-us-retirement

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