Crafting a retirement savings plan for your employees is a big step that helps both the employer and employees. Employees benefit because this makes them better prepared financially for the challenges of retiring. But it also benefits the company. Employees who are more secure financially are often more likely to be productive and have less stress. You may even increase the natural turnover of talent within your organization.
But simply offering a plan doesn't help your employees sufficiently if they don't participate — and if they don't participate in a way that boosts their actual retirement savings. How can you increase participation no matter what plan you choose? Here are a few things any employer can do.
1. Use Auto Enrollment
Automatic enrollment is one of the easiest ways to increase participation at the beginning of your plan's life. It simply means that all qualifying employees will be signed up at a default savings rate without doing anything. If they choose not to participate, they must complete an official form opting out. Follow up on this by automating the enrollment of new employees as they reach qualifying status.
2. Use Auto Escalation
Automatic enrollment has its limitations. Some employees won't take further steps, causing their savings rate to fall too low over time. Another feature — automatic escalation — can help fight this inertia. Automatic escalation is a provision where each participant's contribution rate is slightly increased at regular intervals unless they opt out. Increases often happen yearly, but they can be on any schedule.
3. Offer a Company Match
Free money is a good incentive to help people boost their participation and level of contribution. A matching contribution — where the company kicks in a contribution based on how much the employee contributes — costs the employer some funds, but it encourages employees to meet a minimal level and even to increase it.
You can design your particular matching plan in many ways, such as matching 100 percent of the first 4 percent of a person's contribution and then reducing the percentage of the match after that. You might also increase the percentage of match as the employee contributes more. Or you might add a bonus contribution at the end of each year based on good participation rates or company profits.
4. Keep Things Simple
Low participation can also come when plans are too complicated for the average employee to become engaged with. There may be piles of forms, disclosures, and explanations. Signing up could be complex. They may have to wait too long to become eligible. And making changes to their rates or funds might be time-consuming or confusing. The more you simplify the process, the more likely people are to use it.
Start by minimizing rules whenever possible. Unless a rule adds real value, consider leaving it out for simplicity's sake. Work with a plan designer who knows what works and what doesn't. Limit investment options if necessary. And discuss with employees what they're looking for.
5. Get Excited About the Plan
Want your employees to be excited about their retirement plan? Then the company should get excited too. Adding this benefit means your company is stabilizing, growing, profiting, and maturing. Celebrate these milestones. Have a party. Be enthusiastic about the plan during meetings. Make a big announcement about bonus contributions. In effect, be a cheerleader for your retirement plan.
Where You Can Start
All these moves are beneficial to everyone, but they can be complicated to arrange. Begin by meeting with a service that will help you implement them. Presidio Wealth Management has assisted business owners and managers to set up the best company retirement plans possible. Call today to make an appointment and get started on yours.