Sure, a high salary and a company car may attract top talent and entice employees to work for your company. But often the most important perk in a job offer is the 401(k) plan! Why would employees, especially younger ones, even think twice about saving for their retirement? A good 401(k) can be the icing on the cake for a job offer and can lead to high morale for employees. The importance of retirement planning and financial security is becoming more clear for employees and they are starting to realize the long term benefits of having a good plan early in their careers. So don’t turn a blind eye to having a good 401(k) plan. Your employees will surely thank you.
Here are some things to consider when evaluating your current plan or choosing a new one.
- Matching 401(k)
- Many companies now offer the option of matching the money employees add to their 401(k) accounts. Doing this is a big incentive for employees to add funds to their retirement accounts and start thinking about their retirement at a young age.
- Automatic Enrollment Plan
- One of the biggest challenges for employers when it comes to 401(k)s isn’t just offering one but getting them to contribute toward the plan. According to the Department of Labor, 30% of employees working at a company with a 401(k) don’t contribute to it. The number would undoubtedly shrink if a portion of an employee’s pay was automatically added into their 401(k) account. They have the option to opt-out but few do.
- Waiting Months Before the 401(k) Kicks In
- Allow employees to be able to contribute to their 401(k) from the first day they start working. Why make them wait 3 months or a year? They lose out on the retirement money, and you have a dissatisfied employee.
- Communicate, communicate, communicate!
- According to a Transamerica Center for Retirement Report (TCRS), 95% of employers think their 401(k) plans are very good and satisfy their employees. However, only 80% of workers say they are actually satisfied. Let employees know the details of their 401(k) plan. Things like the type of investment and investment fees are extremely important for your employees to know. Communicating with employees and understanding their needs helps eliminate confusion when it comes to retirement benefits and sets the path for a strong relationship between the employer and employee.
A good plan is very important and could be the deciding factor when evaluating job offers. Follow these tips and you will beat your competitors and leave a smile on your employee’s faces.
If you have any questions about your 401(k) plan, we are more than happy to help. Please contact us and we can sit down with you and go over your plan and benefits!
Craig R. Morris, CPA Principal at Craig Morris & Company