So, you’ve worked hard to design a great retirement program for the employees at your company. Now what? Aside from the initial program set up, one of the biggest challenges business owners report facing is encouraging their employees to participate.
Why does this matter? To start, contributions (both from you and your employees) are paid for with pre-tax dollars. This provides the dual-benefit of reducing your workers’ taxable income and your taxable revenue, which results in less money going to Uncle Sam at the end of each year. Furthermore, the ability of eligible employees to participate in some type of retirement savings plan is required by the IRS. Compliance with these rules is measured by a set of tests, all of which are easier to pass if employee enrollment in your plan is high. In addition to the immediate benefits to your company, retirement plan enrollment directly impacts the welfare of your employees. By encouraging people to take advantage of their retirement benefits, you help them better prepare for a major, and often confusing part of their financial future.
So without further ado, today we’ll outline some tried-and-true tactics you can use to boost interest in your retirement program.
- Auto-enrollment
It may be safe to say that there is no more effective method for getting employees to participate in a program than opting them in by default. With this method, new hires are automatically entered into your retirement program but can elect to drop out if they wish, typically after a specified period of time. Auto-enrollment is so effective because it makes your employees’ lives easier by removing all the guesswork and hoop-jumping from the registration process. In addition to this, it moves along people who might be willing, but otherwise lack the initiative to sign up themselves. According to a survey from Alight Solutions of 333 large U.S. employers, auto-enrollment is the method of choice of over 68% of large employers.
- Match contributions
A good way to boost your employees’ interest in your retirement program is to meet them halfway. Matching contributions provides a little added incentive to contribute to the plan, which can be very effective for encouraging participation. After losing a bit of steam following the 2008 financial crisis, this strategy is now making a strong comeback as people are increasingly drawn to the prospect of “free money.” In addition to increasing signups, contribution matching has also been shown to boost employee loyalty and reduce turnover-related administrative burdens. Money spent towards contribution matching is also tax-deductible, meaning you’ll get a nice tax break to sweeten the deal.
- Drop waiting periods
Take advantage of the excitement you have from new hires to encourage them to participate when they start, rather than six months or a year down the line. Often, employee engagement and morale is highest right at the beginning, so this is the easiest time to encourage people to get enrolled in your program. Reducing the waiting period can be more difficult to manage administratively, but it can yield significant benefits for your program enrollment.
- Education
Never underestimate the power of solid education when it comes to boosting your plan participation. Clear communication about how your plan works and how it benefits your employees is crucial to getting them to sign up. After all, why would anyone go out of their way to participate in something if they don’t know how it benefits them? Make a point to communicate clearly, and regularly, what your program does for those who sign up. When you’re doing this, use a variety of different media to get your message across—newsletters, posters, emails, etc. By making education a core component of your enrollment strategy, you empower your employees to make informed decisions and take the lead in their own retirement journeys.
- Design a strong plan
We would be remiss if we didn’t stress the importance of designing a strong, appealing plan for your employees to enroll in—one that takes into account your workforce demographics and what its specific needs are. Above all else, employees want a plan that suits them and helps them meet their individual goals. Provide that for them, and you’ll have the best shot at high enrollment. Unfortunately, this component is far easier said than done, which is why we always recommend enlisting the help of a financial professional like the Segrust Group to guide you along the way. A certified financial planner can look at a multitude of different factors to help you determine what retirement plan offerings will be most successful with your employee base. This will set the foundation for enrollment successes down the line.
If you would like to discuss how to implement these or other strategies to boost employee participation in your company retirement plan, give us a call at (866) 966-9724.
You May Also Like:
A Primer on Retirement Plans for your Professional Practice
| While the tax or legal information provided here is based on our understanding of current laws, and has been gathered from sources believed to be reliable, it cannot be guaranteed. Federal tax laws are complex and subject to change. Neither LPL Financial, nor its registered representatives, provide tax or legal advice. As with all matters of a tax or legal nature, you should consult with your own tax or legal counsel for advice. |