THE ROI OF A MODERN 401(K): TURNING BENEFITS INTO BUSINESS RESULTS

In today’s competitive labor market, retirement plans are no longer just a perk—they’re a strategic lever for business growth. For PEOs, the modern 401(k) offers measurable returns in productivity, retention, and client acquisition. As the PEO industry continues to expand and diversify, the ability to deliver scalable, high-impact retirement solutions is becoming a key differentiator.

FROM COST CENTER TO VALUE DRIVER

Historically, retirement plans have been viewed as a compliance requirement or a line-item expense. That perception is changing. According to the Employee Benefit Research Institute (EBRI), consistent participation in 401(k) plans leads to significant asset growth, especially among younger employees. This financial security translates into higher engagement and lower turnover.

PEOs are uniquely positioned to help small and mid-sized businesses unlock this value. With more than 230,000 U.S. businesses now partnering with PEOs—representing 15% of employers with 10 to 499 employees—the opportunity to scale retirement benefits across industries is substantial.

BOOSTING PRODUCTIVITY THROUGH FINANCIAL WELLNESS

Research from the Society for Human Resource Management (SHRM) shows that nearly 60% of employees cite retirement benefits as a key reason they stay with an employer. That sense of security fosters a more stable and productive workforce—something every PEO client values.

That productivity benefit is key. According to a 2023 Price Waterhouse Cooper financial wellness survey, employees distracted by money worries are less focused, less engaged, and more likely to miss work. A well-designed 401(k) plan can help address this.

Features like auto-enrollment, target-date funds, and managed accounts also help simplify employees’ decision-making and encourage participation. When paired with financial education, these tools empower employees to take control of their future.

REDUCING TURNOVER WITH SMART PLAN DESIGN

No matter what industry you work in, turnover is costly. Recruiting, onboarding, and training new employees takes time and resources. Retirement plans can help reduce churn by creating long-term incentives for employees to stay.

Key plan design elements that support retention include:

• Employer match: Encourages participation and builds loyalty.
• Vesting schedules: Reward tenure and discourage early exits.
• Portability: Allows employees to take their savings with them, increasing perceived value.

According to a 2024 survey published on Napa-net.org, HR leaders cited employee benefits packages as the key retention factor for 33% of employees remaining at their current company. For PEOs, offering customizable retirement plan designs across adopting employers can be a powerful retention tool.

ATTRACTING TOP TALENT AND CLIENTS

Benefits matter. Job seekers are evaluating employers not just on salary, but on total compensation. A competitive 401(k) offering signals stability, investment in employees, and long-term vision. According to Morgan Stanley at Work’s fifth-annual State of the Workplace Financial Benefits Study, roughly 7 in 10 (69%) HR executives believe access to retirement planning assistance from financial professionals is a top or high priority for employees when choosing where to work.

PEOs that deliver robust retirement solutions help their clients stand out. This is especially important in industries like healthcare, construction, and professional services, where skilled labor is in high demand.

Recent research from NAPA-Net shows that plan sponsors are prioritizing 401(k) design as part of their talent strategy. For PEOs, this means retirement plans are no longer optional—they’re essential to winning and retaining business.

MEASURING ROI: WHAT TO TRACK

Quantifying the return on a 401(k) investment requires looking beyond plan costs. Key metrics to monitor include:

• Participation rates: Higher rates indicate employee engagement and plan effectiveness.
• Retention rates: Compare turnover before and after plan enhancements.
• Productivity indicators: Track absenteeism, performance reviews, and engagement scores.
• Client acquisition and satisfaction: Use surveys and feedback to assess how benefits influence buying decisions.

While some of these metrics are qualitative, they provide valuable insight into how retirement plans impact business outcomes.

PEO INDUSTRY MOMENTUM SUPPORTS INVESTMENT

The timing for retirement plan investment is ideal. According to NAPEO’s Q2 2025 PEO Pulse Survey:

• 75% of PEOs reported revenue growth, and 79% saw increased gross profit.
• 72% increased their client base, and 93% expect growth in worksite employee counts over the next year.
• The PEO Expected Growth Index was 4.07 in Q1 2025, signaling strong optimism.

This momentum creates a favorable environment for expanding retirement offerings and demonstrating their value to clients.

TODAY’S 401(K): A STRATEGIC IMPERATIVE

The modern 401(k) is more than a benefit—it’s a business strategy. For PEOs, offering flexible, high-impact retirement plans helps drive productivity, reduce turnover, and attract top-tier clients. As the industry grows and evolves, retirement solutions will play a central role in shaping workforce outcomes.

PEO leaders should evaluate their current offerings and consider enhancements that align with client goals. By doing so, they position themselves not just as service providers, but as strategic partners in long-term success.

This article is designed to give general and timely information about the subjects covered. It is not intended as legal advice or assistance with individual problems. Readers should consult competent counsel of their own choosing about how the matters relate to their own affairs.