How Cannabis Companies Can Offer a 401(k)
The changes in the labor market due to the COVID-19 pandemic has affected all industries, cannabis included. In 2021, 47 million workers voluntarily left their jobs1 and nearly half of small businesses are experiencing worker shortages.
About 43% of workers who quit their jobs cited inadequate benefits as a factor in their decision. Among workers who cited benefits as a top concern, more than three-quarters said retirement plans are a “must-have” benefit.
For companies in emerging fields like cannabis,4 adding a 401(k) retirement savings plan is an essential tool for attracting and retaining employees. However, given the complexity of the cannabis industry and its hazy legal status in the U.S., it can be more challenging for cannabis companies to find benefits providers willing to create a program. Similar to the challenges cannabis organizations have finding banks and payroll providers, large financial firms that offer retirement plans often decline to work with cannabis companies. But a growing number of boutique firms offer 401(k) programs and other benefits for this industry –- it just requires the right partners to find the right plan.
4 tips for creating a 401(k) for cannabis workers
These four tips can help cannabis companies offer a 401(k):
- Determine plan design and goals. Outline the objectives of the organization’s 401(k) plan and how the plan will be set up, including how employees will be rewarded for participation. Consider developing a formal investment policy statement that includes monitoring the plan.
- Offer a 401(k) match and auto enrollment. Offering to match employee contributions tends to increase participation in retirement plans and increase employee satisfaction. For instance, cannabis companies could match is 50% of salary up to 6%. And automatically enrolling employees in the plan has shown to increase both participation and engagement.
- Educate employees. Employees may be unfamiliar with how 401(k) plans work and how to optimize their investment choices. Cannabis companies need to offer clear information on the benefits of the program, including information on managing their portfolio. This approach will make workers feel more comfortable with their investments and encourage engagement.
- Seek expert advice. Emerging industries like cannabis can be complex. Cannabis companies that want to implement a 401(k) should partner with brokers or consultants who understand the intricacies of the sector and know what retirement benefits companies cater to the industry.
