The beginning of each new year is the most popular time to make resolutions and usher in positive change in nearly every area of life–coincidentally, it’s also a perfect time to stop and take inventory of what could be improved in your employee retirement plan.
With over 51% of employees desiring a retirement plan offering from their employers, it is no secret that retirement benefits are a highly sought-after part of a comprehensive compensation package. However, 2021 data compiled by research organization Matthew Greenwald and Associates revealed that roughly three in four American employees are still worried about their post-career prospects. Topping their list of financial concerns is running out of cash (40%), followed by income loss (18%) and inability to pay for medical expenses (18%). As the retirement planning world becomes progressively more complex, workers are increasingly looking to their employers to help them navigate common obstacles; promisingly enough, it seems many employers are making efforts to step up to the plate.
A June 2021 Principal survey found that over 75% of employers have programs in place designed to educate and support their employees in preparing for retirement. Yet, more than half also report feeling concerned about low preparation amongst employees to actually achieve their retirement goals. As it turns out, there are some fairly large issues affecting both sides of the equation. For employees, prematurely pulling funds out of a retirement account in order to meet other financial objectives can mean there isn’t enough left over when they’re ready to leave the workplace, delaying their retirement. On the other hand, too much leakage creates additional expenses for the employer by increasing the administrative load required to manage the plan. Taking the time to periodically assess your company’s benefits package can allow you to simultaneously recognize and mitigate both problems.
To start, a fresh look at your company’s benefits package may uncover effective ways your organization can cut costs. Often, burdensome fees and money-saving opportunities can lurk within your company’s plan, undetected without the help of a trained benefits professional. The careful eye and expertise of a retirement advisor can assist you and your team in recognizing cost-cutting opportunities that could save your organization significant sums of money on your retirement plan offering each year. Additionally, periodic evaluation of your program also has the potential to improve outcomes for your employees. After a thorough assessment, you may find that your current plan simply isn’t meeting its defined goals, or that there are other options on the market that can provide better results at a lower cost. All of these possibilities can be explored with your trusted financial advisor.
If you’re ready to re-assess and revamp the retirement plan at your company, there are several important questions you should consider:
1. What administrative fees are required for the management of your plan?
Administrative fees may seem small, but they can quickly eat away at the budget set aside for your retirement plan offering. Take an in-depth look to understand exactly how much you’re paying for plan-related fees, and consider how they can be lowered or eliminated altogether.
2. How well do your employees understand the value of your plan? Are they participating?
There is no value in offering a retirement plan that fails to benefit your employees. In your analysis, consider the percentage of employees participating in your plan and subsequently, the extent to which they’re contributing. Low participation and contribution can indicate opportunities for improvement in employee education about your plan and the quality of the offering itself.
3. Is there another plan structure that may be more effective?
Consider how effective your plan is in attracting new and top talent. While your current plan may appear to be working on paper, there may be better potential in other options. With your financial advisor, discuss if there are alternative plan designs that might perform higher or better fit new employee demands, to help you obtain and keep great talent within your organization.
Additional things to discuss with your advisor might include recent mergers or acquisitions in your company, your specific contribution strategy, and even the vendor you choose to orchestrate your plan. It is the job of a fiduciary to give you honest, unbiased advice on how to navigate each of these items and help you arrive at the best solution for your needs.
Job-sponsored retirement plans play a large role in preparing workers for their financial futures. Offering the dual benefit of reducing expenses for your organization and improving outcomes for your workers, analyzing your company’s retirement plan offering from time to time is an important investment that has the potential to reap major rewards in every area of your organization.
If you would like to see how your current retirement offering stacks up against the competition, give us a call. We have extensive experience in retirement plan guidance.