Employees fail to enroll in their retirement plan for a variety of reasons. They may be intimidated if it’s their first time around or they might not fully understand and appreciate the benefits (or the downside of not participating). Some could be concerned about “locking up” their money — and others might worry so much about making the “wrong” investment decision that they procrastinate making any decision at all.

As a plan sponsor, you know the advantages of offering a retirement plan for you including: employee recruitment, increased retention, reduced worker stress, higher productivity and tax benefits. Higher participation and contribution rates can also reduce the chance the plan will fail discrimination testing and be subject to financial consequences if needed corrections aren’t made on time.

But the key to unlocking all the retirement plan benefits for both you and your employees is not simply having a plan but making sure that enough workers actually use it. Here are 5 things you can do to grow your participant ranks.

  1. Enroll everyone. A recent Vanguard survey of 8,900 small business retirement plans found a dramatic effect of automatic enrollment on employee participation rates: 83% with automatic enrollment versus 58% without. And if you need more convincing, Vanguard’s How America Saves 2019 Report found that contribution rates were also higher in automatic-enrollment plans versus voluntary plans: 7.1% to 6.7%.
  1. Offer a Roth. For employees who want to enjoy tax-free income in retirement, providing a Roth option may motivate enrollment. And with no income cap, this move may also be appreciated by highly-compensated employees who earn too much to qualify for a Roth IRA. Additionally, you may tempt younger workers with a longer timeline to retirement who want to take advantage of the lower tax rate they’re paying now as opposed to what they believe they might face later on.
  1. Go multimedia. Offer retirement plan information to participants across a variety of modalities. Some may prefer in-person meetings, while others would rather watch a YouTube-style video at their leisure. And still others might prefer scribbling notes in the margins of a pamphlet. Provide education about retirement plan benefits in a way that’s accessible for everyone, no matter their degree of financial sophistication. Answer questions in short- and long-form, at basic and more advanced levels — and in as many media formats as possible.
  1. Simplify. Simplify. Simplify. It should be easy and straightforward for participants to sign up or make changes to their retirement plan elections or contributions. Changes should only take a few clicks, whether from a laptop, mobile phone or tablet. Optimize a seamless web experience for each platform.
  1. Why wait? Shorter waiting periods allow new employees to start a saving habit straight out of the gate. It can also be an attractive feature when recruiting seasoned candidates who don’t want to interrupt their retirement savings. So, consider shortening — or even eliminating — waiting periods altogether. Want to take the notion of instant gratification one step further? Consider allowing immediate vesting, which can help make your organization more competitive to draw top talent and further encourage participation in the plan.

 

Sources

https://institutional.vanguard.com/VGApp/iip/site/institutional/researchcommentary/article/InvComHASsmallBusinessInsights

https://pressroom.vanguard.com/nonindexed/Research-How-America-Saves-2019-Report.pdf

https://scholar.harvard.edu/files/laibson/files/plan_design_and_401k_savings_outcomes.pdf

https://hbr.org/2020/10/employers-need-to-reinvent-retirement-savings-match

https://www.psca.org/PR_2020_63rdReport

The information in this email is confidential and is intended solely for the addressee.  If you are not the intended addressee and have received this email in error, please reply to the sender to inform them of this factWe cannot accept trade orders through email. Important letters, email, or fax messages should be confirmed by calling 813-760-1769.  This email service may not be monitored every day, or after normal business hours. To add a colleague or be removed from this list, please email us at PlanInsight@advizrs.com or call 877-752-3849. Registered Representative Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor, Cambridge, Advizrs and RPAG are not affiliated.

 

 

Participant Corner

 

 

What’s an HSA and is it Right for You?

 

Health savings accounts (HSAs) have grown tremendously in popularity over the past few years. You’ve probably heard of them or maybe your employer offers one. This memo will uncover answers to common questions you may have about HSAs.

 

What’s an HSA?

A type of savings account that allows you to set aside money on a pre-tax basis to pay for qualified medical expenses.

 

Can anyone get an HSA?

In order to open an HSA, an individual must first enroll in a qualified high deductible health plan (HDHP).

 

I’ve heard HSAs have triple-tax advantages, what are they?

  1. Contributions are tax-deferred and eventually even possibly tax free (see #3).
  2. Contributions can be invested and potentially grow tax free (see #3).
  3. Withdrawals aren’t taxed, if used for qualified medical expenses.

 

If I change employers, what happens to my HSA?

HSAs are completely portable for employees, meaning you may take it with you if you change employers.

 

Do I lose my HSA funds at the end of the year?

No. The balance can grow and carry from year to year and can also be invested.

 

What can I pay for with my HSA?

Generally HSA funds can be used to pay for anything that your insurance plan considers a “covered charge,” including charges not paid by your health insurance because they were subject to a co-pay, deductible or coinsurance.

 

 

For more information on HSAs, please contact your Advizrs Retirement Plan Consultant at PlanInsight@advizrs.com

 

 

The information in this email is confidential and is intended solely for the addressee.  If you are not the intended addressee and have received this email in error, please reply to the sender to inform them of this factWe cannot accept trade orders through email. Important letters, email, or fax messages should be confirmed by calling 813-760-1769.  This email service may not be monitored every day, or after normal business hours. To add a colleague or be removed from this list, please email us at PlanInsight@advizrs.com or call 877-752-3849. Registered Representative Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor, Cambridge, Advizrs and RPAG are not affiliated.