Right now is a golden opportunity for employers looking to increase retirement plan participation. The IRS announced that they are increasing 401(k) and IRA contribution limits by $500 this year.
“The news gives employers a great opportunity to educate employees about the importance of saving for retirement,” says Retirement Plans Manager Michelle Abergas. With contribution limits pushing $20,000 per year, it’s fair to say that only the most highly compensated employees or dedicated savers will reach the maximum.
“But, that doesn’t change the fact that the sooner you get money in, the more it has time to increase,” says Abergas. “That is important for everyone.”
Taking the time to ensure that your employees save for retirement is an investment in your future workforce. However, if those benefits remain underutilized, they don’t do anyone much good.
3 tips to increase retirement benefit participation
- Emphasize financial wellness
While fitness and food often hog the spotlight in discussions of workplace wellness, financial wellness is an important factor in overall employee well-being. Over 86% of Hawaii workers wish they had more money saved, according to a 2016 Hawaii Retirement Security Survey (PDF). Anxiety and the feeling of being behind on retirement savings can be at least partially alleviated with financial planning and advice.
- Respect generational differences
Retirement plans are a key recruitment and retention tool, especially among highly skilled and well educated Generation X and Baby Boomer employees. Millennials, unfortunately, tend to utilize retirement savings less. So why do we often communicate benefits the same way to everyone? Informing millennials on the power of compound interest can get them thinking more strategically about retirement. Baby Boomer employees, on the other hand, can taste retirement around the corner. You’re doing them a service by making sure they’re aware of every savings opportunity available to them.
- Use the power of the employer match
Employer matching is a powerful incentive to encourage retirement plan participation. According to Pew Charitable Trust, when an employer match is offered, retirement savings participation increases by 15-16% in all age groups (PDF). Contributions are tax deductible and there may be employer tax credits and other incentives available.
Don’t have a retirement plan set up for your employees?
If your business does not offer employee retirement plans, you are not alone.
Approximately 50 percent of private sector employees in Hawaii do not have access to an employer-sponsored retirement plan, according to the State of Hawaii. The majority of those individuals work for businesses with fewer than 100 employees (Source).
For owners of small and medium-size businesses, it may not always be feasible to set up an in-house retirement plan. The big insurers aren’t exactly knocking down the doors of smaller businesses. Larger employers have more leverage when it comes to controlling costs.
Many business owners will choose to go through a retirement services firm or broker, which can be expensive to set up and may not be integrated with your employee portal. Clients of simplicityHR, on the other hand, have access to “big company” retirement benefits via the ALTRES 401(k) Plan.
“The ALTRES 401(k) Plan is very attractive for both large and small plans in Hawaii across almost every metric,” explains financial advisor Cris Borden. “Small plans can access a large plan fee schedule, large plans no longer incur audit costs, administrative burdens are lessened, investment options are prudent and diversified, and owners and executives greatly reduce their fiduciary liability.”
- Emphasize financial wellness
Have a question for one of our HR experts? To learn more about setting up a retirement plan at your company contact simplicityHR.
This article is for informational purposes only and does not constitute legal advice. Readers should first consult their attorney, accountant or adviser before acting upon any information in this article.