What’s in Your Retirement Toolbox?
The 401K (aka retirement) Plan. Employers and benefit managers spend so much time discussing fees and compliance that we sometimes forget how critical this benefit is to our employees and their families. Research shows that employees with access to employer-sponsored workplace retirement savings accounts are more likely to save for retirement. Most employees spend much of their time at work and they count on us to help them meet their retirement needs. That’s why at my organization we work hard to provide a financially strong, structurally diverse 401K plan. Our job it to evaluate the many resources available in the “Retirement Tool Box” and give our employees as many tools as we can to encourage and promote retirement savings.
Some employers, including my organization use a large 401K Administration provider to make sure our fund offering is diverse. We benchmark against other companies annually and negotiate our fees as low as possible to remain competitive.
We recently diversified our benefits to offer a guaranteed “pension-like” life-time annuity option. An annuity option allows employees to convert part of their retirement funds into a stream of guaranteed lifetime income payments using a single lump-sum of money or through payments over the life of the investor. The fees associated with these types of accounts are low, and our employees can put up to 50% of their 401K contributions into this option. Employees will know exactly how much monthly income they will receive once they retire, which is helpful for planning purposes including long-term disabilities and health care. As an employer we view this as a welcome step forward in the 401K world, as we all struggle to replace the Pension our parents had.
In addition, my organization has an automatic enrollment within the first 90 days of employment at a level that guarantees the maximum company match. There is an automatic increase in contribution rate at the same time we adjust employee compensation. Based on our experience, we have learned that very few opt out or reduce their contribution rate, so we have increased the participation and contribution rate in our 401K. We only allow 1 loan outstanding at a time, and no hardship withdrawals.
And finally, we educate. As a benefit my employer offers a Financial Wellness program that helps employees learn to budget, save, and pay off debt. We have an annual Retirement Plan meeting to educate about fund options, risk analysis, and the financial costs associated with living in retirement including health costs. We provide one-on-one retirement counseling every other year with a Retirement Counselor that looks at each employee’s individual needs and goals and helps them build their own retirement plan.
Will it work? Will our employees be financially ready to retire? We hope so. The best we can do as an employer is to provide the tools to promote and encourage retirement savings. Each year, we continue to review the “tools in our Retirement Tool Box” to evaluate what employees need, and what we can provide.