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....
As the unemployment rate has dropped, hiring has grown increasingly competitive, especially for businesses with highly-specialized positions. If you act as a 3(21) fiduciary, it’s important to understand how 401(k) matches factor into the hiring process and how they financially benefit the whole company. Here are a few reasons why offering a 401(k) match helps your business.
If you don’t offer a 401(k) match, chances are your competitors do, meaning it’s more difficult to attract top talent. A full benefits package that includes a 401(k) match may prevent you from paying top dollar to win candidates who might consider a job offer from your competitors.
In order to reap the largest rewards attached to a 401(k) match, employees often must work for a particular period of time, known as vesting. This timeframe encourages employees to stay and maximize their contributions to receive the best benefits. Since replacing...
A business’s 321 fiduciary can end up playing several roles. Not only are they expected to act as an advisor, but they also help manage the business’s 401(k) program, mediating between the company and its plan sponsor.
Once a business agrees to adopt a particular plan, it becomes the responsibility of a plan administrator to enroll employees. But not all workers will want to participate and those who do will likely have questions, so make sure you have written regulations in place before explaining the plan and accepting signups. Here are a few things to know about eligibility if you’re in charge of your business’s 401(k) plan.
Eligibility is an important part of setting up a 401(k). It can be tempting to make requirements as flexible as possible so every employee can participate. However, doing so can drive prices up and hurt everyone, including your business, and can...
A business merger can be stressful for all involved. In addition to educating and reassuring employees and clients, leaders must exercise proper fiduciary risk management. During the planning phase, it’s important to consider 401(k) plans, which fall under the buyer’s responsibility once the acquisition is complete.
For plan sponsors at the acquiring company, it’s crucial to thoroughly investigate the seller’s 401(k) plan to determine whether you want it terminated or merged into your own. Here are a few tips for how to handle a 401(k) during a business merger.
When to Adopt
During an acquisition, many businesses choose to operate two separate 401(k) plans to ease employees into the new business. Others choose to merge plans, which can create complications, including that any liabilities may fall under the responsibility of the acquiring company’s leadership. If a substantial portion of the seller’s employees remain, this might be the easiest way to...
An increasing number of businesses are bringing in a 3(21) fiduciary to act in an advisory role as employees choose the best retirement investment for their hard-earned dollars. Unfortunately, not every business can afford these trained professionals, which leaves HR personnel to serve in the role.
Not all HR representatives have the specialized training to advise employees. However, over time, they find themselves in the valuable role of knowing more about their workforce’s financial situation than anyone else in the company. Here are a few ways HR teams can benefit from paying attention to the financial concerns of employees.
Invested Businesses Engage Employees
Health and wellness programs have become popular in recent years as businesses realize the cost savings that can come from keeping their workers healthy. However, financial wellness can bring similar benefits to a company since employees will help manage stress that will allow them to focus...
Staying healthy is getting more expensive with each passing year, even for those whose healthcare is provided by an employer. According to a recent study, family health insurance premiums increased an average of three percent this year, which was the sixth consecutive year that such costs rose.
Pension consulting experts have noticed that this trend has made consumers more aware of the importance of financial fitness. Not only must they now save for retirement, but they also have to consider medical care. Long before retirement, a serious health issue could wipe out a person’s entire savings. For employers and retirement advisors, it’s more important than ever to steer people toward financial health. Here are three major ways to offset rising healthcare costs.
Health Savings Accounts Employers are increasingly looking into health savings accounts (HSAs) as a way to help employees set money aside for later medical needs. Plan participants...
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