Times have changed. It is no longer enough for employers to simply offer a retirement plan hoping that
employees will contribute. Employers must prepare for a world where the key to retirement wellness will come from a strategic plan design and communication strategy. Willingness to throw money at the problem may have worked in the past, but no longer.
Employers must rethink their retirement plan to make certain that employees are saving enough. If not, their employees will not be ready to retire, which will create a new kind of risk for the employer. Therefore, it is worth the effort for employers to provide a well-designed retirement plan and make sure that employees understand the plan’s benefits.
The good news is that the chamber world is recognizing this! “Preparing employees for retirement” was the most commonly identified goal for employers, according to the 2014 ACCE plan sponsor survey. To assist you with this goal, the ACCE’s Benefits Trust has modified its plan design options. In addition, the ACCE benefits team has expanded its free plan design consulting service.
So how does an employer maintain its 401(k) recruitment and reward tool while also driving engagement and retirement wellness for its employees?
Strengthen your plan design
The most effective plan design feature for employers is automatic enrollment of participants at a deferral rate of six percent or higher. Two-thirds of employees in ACCE’s 2014 participant survey said it would be good for their plan to incorporate automatic enrollment. ACCE Benefits Trust has added this as a standard plan provision for all new participants beginning Jan. 1, 2016. For those organizations in the ACCE plan already utilizing this feature, the response has been extremely positive, with only 13 percent of employees changing their auto-enrollment.
Structuring the employer contribution to encourage employee savings is another key to driving employee engagement and advancing account balances. Multiple studies have shown that employees tend to save up to the employer’s match cap. ACCE’s participating employers who have transitioned to the employer match prove that this practice works—even in the nonprofit world where base salaries can be below market rate. What’s more surprising is that employees appreciate a matching contribution even more than a giving contribution, according to the ACCE participant survey. The most likely explanation for this is that employee is more engaged and therefore more aware of the effect the employer contribution has on the employee’s retirement wellness.
Other ways that employers drive employee engagement and retirement wellness include:
In a world where employers are looking for ways to recruit talent and retain employees as a driver of success for the organization, creating a better retirement plan that fits the need of both the employee and the employer is no longer optional. It’s becoming a matter of survival.
Download this article: The Changing 401(k) Landscape (1)