An educated employee is an empowered employee, especially when it comes to retirement savings and financial wellness. To help employees better understand their fiduciary process the key features of your company’s 401(k) plan, and the importance of setting aside money for their future, it’s crucial to offer financial education.
Employees may misunderstand exactly what goes into your 401(k) plan. To dispel any misconceptions, companies should aim to communicate 401(k) information in simple, easy-to-understand terms. Bear in mind that employees are easily overwhelmed by a surplus of options! Make yourself available to help guide them toward choices that are best for them, and encourage them to approach you with questions. If they don’t ask you, there is a good chance they are taking matters into their own hands by searching for answers online or from other employees, which only increases the odds of miscommunication.
Offer Multiple Education Formats
As part of the Employee Retirement Income Security Act of 1974 (ERISA), businesses now follow minimum standards as part of general fiduciary risk management. Under the 38th definition of that act, plan sponsors and associated fiduciaries are absolved of responsibility for the decisions made by the investment manager. However, moderating their risk means evaluating that investment manager and documenting that evaluation on an ongoing basis.
But what does this evaluation require? Here are a few things your business should include as you evaluate your own investment plan manager.
Regardless of regulations, you should take steps to vet your investment plan manager. If you’re entrusting an entire firm with the duty, you should check into the leaders’ credentials and backgrounds. Look for CEFEX certification and make sure they haven’t received disciplinary action by regulatory authorities. Their past experience in delivering advice on investment plans is crucial as well since...
How to Encourage Employee Participation in Your 401(k)
The number of workers failing to prepare for retirement is only growing, with millennials participating less than previous generations. Part of an organization’s fiduciary process includes encouraging workers across all age groups to invest in their future, but unfortunately, that isn’t always easy. If you’ve set up a 401(k) for your company, here are a few things you can do to boost enrollment.
Implement Auto Enrollment
Research has demonstrated that auto enrollment is undeniably the most effective method to increase employee participation. In a study on the impact of automatic enrollment on savings incomes, there was a sizable 50 percent increase in new employee participation. However, the default contribution rate plays a role as well. Under auto enrollment, contributions are higher when there is as a generous contribution rate, and many plans now include auto escalation provisions that increase contributions at 1...
Businesses understand how vital it is for employees to understand retirement options and are increasingly including employee education in fiduciary risk management, whether it’s in the form of one-on-one counseling or educational seminars. Take a look at these reasons why you should communicate with and educate your employees.
Gossip Can Be Dangerous
If retirement opportunities are not properly explained, employees will likely ask each other instead. Someone could accidentally relay incorrect information and create the misconception that your savings plan options aren’t effective, leading to disgruntled, unsatisfied employees. This tends to snowball into frustration and a lack of trust. Make sure your employees know that you have their best interest at heart.
Create a culture of open communication. Encourage employees to approach you with questions, suggestions on benefits they’d like to see, or concerns, whether they’re positive or negative. Intentionally respect, honor, and reward that honest communication. This...
Many businesses review their fiduciary processes in the first quarter. Are employees happy with the retirement investment options they’re offered? Are they getting the best return on their investment?
As part of that evaluation, many businesses consider their plan advisors. This is the perfect time to reevaluate and consider adding one to your team. Here are a few ways investment advisors can help your business.
Plan Design and Documentation
Choosing the right retirement plan can be challenging, even for a business with a full human resources department. For established companies, a plan advisor can sit down with the leadership team to review current benefits. And at new companies, advisors can provide counseling on initial decisions. In both scenarios, guidance from advisors can help increase success rates.
Investment Monitoring and Advice
There are regulations governing retirement plans, so part of your fiduciary process should be ensuring your plan meets those requirements....
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