No employer wants to see anyone on their team retire without enough funds to live with dignity. Unfortunately, most Americans are not saving enough for retirement. In fact, "the mean American over the age of 65 can count on about $8,400 [each year] from his or her 401(k)," The Motley Fool reports.
Additionally, to drive success for your company, you must recruit and retain talented employees. The benefits package you offer is a critical component of your employee retention and recruitment efforts.
It's not enough to simply include a 401(k) plan in your employee benefits package. You need a plan that delivers value for your employees. By helping your employees secure a comfortable retirement, you work to create an engaged and loyal workforce for your organization.
Are your employees participating in your corporate 401(k) plan? Do your employees understand the value your plan offers? Is your plan delivering results? Are your plan advisors helping your employees and your company succeed? Or, is your 401(k) plan failing your employees?
3 Questions To Evaluate Your Corporate 401(k) Plan's Performance
No two employee 401(k) packages are exactly alike. To drive results for your company and your employees, you need a plan tailored to your specific needs.
Evaluate your plan's performance by asking these three questions:
- Does the value your plan offers measure up to the plans your competitors offer?
Look at investment options, plan costs, matching percentages and levels of advisor support to determine this. - Are your plan participation rates high enough?
Participation rates are a very good indicator as to whether your plan offers your employees enough value, or if they understand the full value of the plan. Low participation rates might put your plan trustees at risk for fiduciary non-compliance. Participation rates below 50% should cause concern. - Are you losing employees to the competition?
If so, your competitors might be offering a better plan than your organization, or at least doing a better job communicating the value of their plan.
Offer a competitive plan by tailoring your offerings to your specific industry. If, for instance, you work at a high-performing tech company, you should consider offering a 100% match up to 5% and providing access to comprehensive financial planning services. On the other hand, if you're in a low-margin industry like distribution or retail, you may only be able to afford a 50% match up to 3% and more limited support services.
It's critical that you ensure your plan and its performance don't fall behind the competition. You don't want to lose a high-performing employee because your competitor lured them away with a superior retirement plan.
Deliver Results By Focusing On Communication And Education
If your plan's offerings measure up to your competition, but your participation rates lag behind, it could be due to inadequate communication and education efforts.
If your company is planning to launch or switch to a new plan, start your education efforts early. Send a company-wide email at least two months in advance, so when your plan advisor comes in to talk about the plan, your employees will know what to expect. Also, instead of relying solely on the plan advisor's informational materials, send plan information on your company letterhead. This could increase interest in participation up to 15%.
Additionally, make sure your approach to plan communication is personalized and multifaceted. If your workforce is mobile, have robust online plan information options. If your workforce is centralized, have a plan advisor come in to talk about not just the specifics of your plan, but also the savings and tax advantages it offers your employees.
Make it simple for your employees to find out about the plan and its value. Be willing to sit down with your employees privately to discuss their concerns and work with a plan advisor that is willing to do the same.
By focusing on communication and education, you limit the risk that a lack of information causes your plan to perform poorly.
Drive Company Success By Improving Your Plan's Performance
Check back for our next post to discover tips for improving your plan's performance.
Discover how to build a retirement plan that drives employee retention and recruitment by viewing our webinar, Is Your 401(k) Plan Failing Your Employees?
