Turn your 401(k) plan into a recruiting and retention tool: 4 things you can do today
Despite the news of layoffs, recruiting and retaining your best employees is still an extremely competitive endeavor in many roles and industries. Employee benefits are becoming an increasingly important part of your attractiveness as an employer, including (and especially) your retirement plan program.
The recent 2022 Global Benefits Attitudes Survey* by consultancy WTW found that 60% of more than 9,600 employees surveyed said that their retirement benefits were an important reason they stayed with their current job (up 20% since 2010). Further, 59% said they would be willing to pay more themselves for enhanced retirement benefits.
Interestingly the top improvement these employees want from their retirement plan is a guaranteed retirement benefit, which also happens to be one of the hot topics in the retirement industry today. What this shows us is that people don’t know how the nest egg that they are building is going to translate into a monthly income in retirement. They are not sure how much they can safely spend and are afraid of running out of money. They need help and you can provide it.
While having lifetime income products in a 401(k) plan is possible and a topic for another day, offering a 401(k) program with a robust financial education and advice component could be just what your next star team member needs to accept that offer.
So, what can you do now?
Make sure your retirement program is competitive. Conduct an annual benchmark. You should be doing so anyway to monitor plan fees, but you should also be benchmarking plan features (matching, etc.) and service providers to make sure you are competitive with your peers.
Ensure you are getting the best plan for your buck. An aggressive fee review can often highlight areas where costs can be cut to free up funds for enhancements. Many plans are still on fee schedules that charge a percentage of assets. If your plan has grown, you may be better served by flat or per participant fee arrangements that can lower existing costs so you can invest in new features and benefits.
Take advantage of low or no-cost enhancements. There are plenty of ways to sweeten your 401(k) plan without increasing your benefits budget or costs to employees. One client of mine recently decided to pay their 3% Safe Harbor contribution on a per payroll basis instead of annually. This way employees get the money sooner and can get it invested right away. Easy improvement and only impacts cash flow timing. In fact, it makes it easier for many companies.
Pass some costs on to the plan if needed. The majority of 401(k) plans pass some or all of plan costs on to the plan. This means the expenses are paid pro-rata by plan participants. Refer to the WTW study: 59% of employees said they would be willing to pay more themselves for a better plan. Whether this means moving to a provider with better technology, hiring an advisor to provide financial support and guidance, or adding a Safe Harbor match. There are many things you can do while still meeting your fiduciary responsibility of keeping plan fees reasonable.
I get excited to help companies improve their plans and fulfill our mission of creating financial confidence through our work with employees in 401(k) plans.
Don’t hesitate to reach out to me if you are not sure how your plan stacks up.