As an astute employer, you make investments in your employees in many ways. You hire the best people that you can find and compensate them fairly. You train them to excel at their position and to grow into new roles with greater responsibility. And when you make the decision to invest the time and resources to offer them a high-quality retirement plan you are investing in the platform that will help them to build a lifetime of financial security.
Few things though are more frustrating than when the employees that most need to work to build that security choose not to do so. Compounding this frustration is that a lack of participation across your workforce can also create problems with your retirement plan’s non-discrimination testing at the end of the year, which can create an adverse result for those employees that are actively using the plan.
When this issue arises in plans, there are a few steps that are recommended to help motivate and guide your employees to taking full advantage of the benefits that you have put into place. Among them are:
- Automatic enrollment of all employees into your plan. According to data provided by Vanguard’s small plan division, employee participation increased from 57% to 82% by simply defaulting employees into a plan, as opposed to waiting for them to enroll.
- Automatically increasing deferral rates on an annual basis is one way to take employees from a relatively modest deferral to a healthy, meaningful contribution over time. After all, it’s great to have employees contribute 3% of their pay as compared to nothing, but a deferral rate that remains stagnant over time will likely not be sufficient to help your employees retire comfortably.
- Making it easier for employees to increase their deferral rates as their financial situation improves is one of the surest ways to help employees them do so. Rather than filling out new forms and offering limited time windows to make changes, your platform should be set to offer your employees the opportunity with a few clicks of a mouse. This is especially true for employees that see variances in their income from month-to-month or as a result of production incentives.
- There is no substitute for quality education. How often does your plan provider spend time with your employees to help them to understand the opportunity that they have in plain, easy-to-understand language? And does your plan advisor make themselves available in a way that encourages your employees to take responsibility for their future, or do they inadvertently dissuade them by them by being hard to reach? Do not let a complacent provider diminish the value or your plan with poor service.
These are just a few of the different techniques that can be implemented into an existing plan to provide the encouragement that your employees need to get started, or to ramp up their efforts. If your plan provider is NOT being proactive in helping you to make your 401(k) offering the most effective plan for your employees that it can be, contact your R&R Insurance Agent and let them know. We have the Wealth Management talent and resources in-house who look forward to meeting with you to review your plan and provide specific guidance as to how to improve your plan.
You made the commitment to provide the tools that your employees need to be successful, now let us put you in contact with the team that will provide the value that you should expect.
