Should Your Restaurant Offer a Retirement Plan?

July 13, 2022

At a glance

  • The main takeaway: Restaurants have long overlooked offering a retirement plan due to the cost and compliance burden, but recent changes have made it more feasible – even beneficial – to offer savings options to employees.
  • Impact on your business: Your restaurant could benefit from tax credits and deductions while also boosting employee retention and attracting better talent, all by offering a retirement plan incentive.
  • Next steps: Make sure you choose the best plan and follow the right tax strategy for your restaurant’s unique needs. Schedule a consultation with an Aprio advisor to learn more.

The full story:

A top challenge facing most restaurants today is the struggle to attract and retain talent. We’ve previously talked about some potential staffing strategies, including the importance of employee benefits packages. If you’re considering this strategy as a way to boost employee retention, it might be time to consider offering a retirement plan.

Retirement plans have been historically challenging for restaurant owners to maintain, but recent legislative changes and changing cultural expectations have refocused a spotlight on the issue. If you thought offering a retirement plan for your restaurant employee was a non-starter because of the challenges, consider a new perspective:

  • New legislation is paving the way for small businesses. The SECURE Act, passed in 2019, makes it easier for businesses to use multiple employer plans, and the recently proposed SECURE Act 2.0, if passed, would further expand the benefits for both employees and employers. Meanwhile, California is one of the latest states to require employers of a certain threshold to offer a qualified retirement plan through the CalSavers program. Offering a compliant retirement as an independent restaurant just isn’t the headache it used to be. If you haven’t recently evaluated offering a retirement plan, you might be surprised by how much easier and more feasible it has become in recent years.
  • You might be missing out on tax savings. In addition to making it easier to manage retirement plan compliance, the SECURE Act also incentivized employers by creating lucrative tax breaks. Employers that offer qualified retirement plans could be eligible for multiple tax credits and deductions, and the SECURE Act 2.0 stands to take those incentives even further. Your employees will benefit, too. Besides the obvious benefit of building up their savings, restaurant employees may be eligible for a tax credit on their retirement plan contributions. Some restaurants also re-invest the retirement plan tax incentives as bonuses or salary increases offered to employees.
  • It’s an investment in retention. Restaurants often cite high turnover and transient employees as a reason to avoid offering a retirement plan, without considering that a retirement plan might reduce that turnover. Job candidates today are looking for more than just a paycheck, and they are more likely to be loyal to an employer that values employee wellbeing. Offering a retirement plan to your restaurant employees will not only help you attract a higher caliber employee, but it will also help you maintain a more stable staff.

The bottom line

Offering a retirement plan to your restaurant employees boasts many potential benefits, both for your employees and your business, but it won’t be the right choice for every restaurant. There will still be challenges, especially around navigating certain compliance requirements, so you should plan to do a cost-benefit analysis before moving forward.

If you’re considering a retirement plan as a strategy to grow and retain staff, make sure you gain a thorough understanding of the risks and rewards. Dana Zukofsky, Tommy Lee, and Jessica Hussain from Aprio’s Restaurant, Franchise, and Hospitality practice have the deep industry experience to help you understand your options and works closely with Aprio’s Retirement Plan Services group to help restaurants choose and maintain the best retirement plan based on your restaurant’s unique needs.

Schedule a consultation today.

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About the Author

Dana Zukofsky

Dana Zukofsky is the Restaurant, Franchise & Hospitality Practice Leader at Aprio, providing advisory, accounting and consulting services to help foster profitability and growth.