Retirement plan sponsors are the first, and most important, line of defense in providing employees with well-managed retirement savings plans.
Retirement plans have long been touted as an effective tool for companies looking to improve their recruitment and retention rates. Strategically developing procedures around retirement and other benefits programs for employees at various stages of their careers is one way to ensure that your company is optimally leveraging its retirement benefits.
The employees who tend to be most familiar with their retirement benefits plans are those who are closest to retiring, while workers who are just entering the workforce may not be as immediately concerned with a retirement date that’s 30 years in the future. This younger group may not see the value in contributing to supplemental savings, or may not be as responsive to enrollment reminders as their older counterparts. In this article, we’ll explore some retirement benefits strategies that will enable you to offer your employees more robust plans and encourage increased participation in those plans across all age demographics.
Keeping Employees on Track for Retirement
Most employees have certain expectations about the trajectory of their careers. Often, these expectations involve a steady progression up the career ladder and wage scale, along with the accumulation of knowledge that comes with those career moves and experiences. This natural career life cycle depends on a predictable pattern of young workers entering the full-time workforce after completion of school and older workers exiting the workforce at or around traditional retirement age.
To encourage your employees to retire on schedule, establish what you think is the best employee life cycle for specific departments, groups, and positions. Once you have an idea of an optimal life cycle, you can work with your management team to determine plans that would enable older employees to occupy positions where they transfer knowledge to younger workers and still retire in time to enjoy their golden years, freeing spots for younger workers to learn and grow in their careers.
Auto Enrollment
One strategy that businesses have been increasingly employing for the past decade, and is particularly effective at encouraging participation among younger workers, is automatically enrolling their new team members into retirement savings plans during their onboarding process.
With a traditional retirement plan, funds are automatically deducted from the employee’s paycheck and contributed in their name without them needing to take any further steps. Making it easier for employees to enroll and participate in their retirement benefits increases the buy-in dramatically.
According to Forbes, 46% of retirement plans use automatic enrollment—up from 20% in 2008. For larger companies, 65% of plans with 5,000 or more participants use auto enrollment. Using the same data, researchers found that a staggering 92% of employees participated in automatic enrollment plans instead of opting out, while only 57% of employees enrolled themselves in voluntary retirement benefits plans.
Retirement Plan Education
Recruiting and retaining the right employees is the first step in building a productive workforce for your business, but giving them the tools, knowledge, and resources to prepare for retirement is equally important. Simply having a 401(k) or retirement plan is not enough—providing an effective retirement solution is invaluable.
It is also important to ensure that your employees are in a position to retire by educating them on the importance of planning for retirement, and conducting the necessary due diligence on your company's investment advisor with your internal investment committee—because believe it or not, you absolutely want your employees to retire once they reach retirement age. As a business owner and plan sponsor, you have a duty—a fiduciary responsibility—to your employees to ensure that whatever plan you have in place provides your employees with the best possible benefit.
Helping your employees properly prepare for retirement is a responsibility that business owners take seriously, and for good reason. Remember to take the employee lifecycle into account when deciding on the best way your company can support employees in saving for retirement; consider auto enrollment to encourage your employees to save; and invest in retirement plan education so that your workers get the most out of their retirement benefits.
Setting up a retirement benefits plan for your business can be a complex task, and it's critical that you conduct proper and regular due diligence on both your plan provider and advisor. Learn how to evaluate your current or prospective advisors so you can choose the best fit for your company. Click here to download our free guide: https://info.swbc.com/investment-advisory-rfi-evaluation-guide
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