Are you offering your employees a comprehensive retirement plan? The IRS and Department of Labor set forth regulations that must be met—timely filings, required disclosures, proper eligibility, and vesting rules—but we believe compliance doesn’t equate to optimization. A 401(k) retirement plan can meet these guidelines and still fall short of delivering sufficient value to your employees. To offer more to your employees and retain valuable talent, consider building a retirement plan that will offer features today’s informed employees are looking for.
Let’s explore why it’s so crucial to deliver that value in your retirement plan options.
Compliance vs. Performance
To be compliant, a 401(k) retirement plan needs to adhere to legal standards. What does that mean, though? It means proper documentation, contribution limits, timely reporting, and discrimination testing. These elements are essential, but we believe it may fall short of ensuring employees receive optimal value.
To help achieve a high-performing plan, consider these elements:
- Diverse investment options
- Strong participant engagement and support tools
- Low administrative costs and investment fees
Ensuring your plan meets legal and compliance standards is step 1. Steps 2 and beyond are about making the plan worthwhile and offering quality.
Hidden Costs of a “Bare Minimum” Plan
Is it easier to make sure your retirement plan options are compliant and call it a day? Maybe in the short-term. But over time, your employees will realize that your offerings may not truly have their interests in mind, and morale could fall. In addition, basic plans often include hidden fees that can hurt employees and employers alike.
- Fees: Plans that have little oversight are known to have above-average administrative fees that, over time, can potentially erode retirement savings.
- Investment Choices: Employee investment selection options may be limited, which can lead to reduced portfolio performance over time.
- Education: Access to robust financial wellness tools should be offered with every 401(k) plan but isn’t always the case. This has potential to affect employee participation rates and experience less savings discipline over time.
The Impact on Employee Satisfaction and Retention
A strong 401(k) retirement plan can be more than a perk. It may also help with attracting and retaining employees. The labor market is more competitive than ever these days, and people are less likely to settle for a position when they know better options are within reach. Long-term employee benefits that offer value can help make your business one of those better options. Offering robust benefit plans helps to show your employees that you’re invested in their future and success—and that you understand how important morale really is.
Characteristics of a Competitive 401(k) Plan
So, how do you make a 401(k)retirement plan competitive? Here are a few options to consider:
- Transparent fee structures with no hidden costs
- Access to modern options for investing—mutual funds, index funds, target-date funds, and ESG, for example
- Employee education options, such as workshops and access to financial advisors
- Financial wellness programs that assist participants in managing their debt, budgeting effectively, and helping to plan for a comfortable retirement.
We believe the goal is about more than a retirement plan—it’s about providing a roadmap to retirement success for every team member.
How Employers Can Evaluate and Improve Their Plans
If you’ve decided it’s time to upgrade your 401(k) retirement plan offerings, it’s important to know how to go about it. Here are a few steps to help determine if your plan is a good fit for your employees or if adjustments may be required:
- Benchmark Your Plan: Research the industry standards for fees, investment options, and performance. How do your plan features compare?
- Work With an Employee Fiduciary: An employee fiduciary has a legal obligation to act in the best interest of your employees. This means they seek to provide optimal plan options that help maximize value.
- Survey Your Employees: Honest feedback may be tough to hear, but it can be invaluable. Ask your employees if they are satisfied with their current plan, and whether they understand the investment choices they’re making. This information can play a key role in making plan improvements.
Consider Upgrading Your 401(k) Retirement Plan Choices With Us
So you’ve “checked the boxes" and found your retirement plan options to be within compliance. To demonstrate value to your employees and help maximize talent retention, you need to remain actively competitive with your retirement offerings. By understanding what adds to this value and making adjustments in response, you send a clear message to your team that you value them and are willing to work to keep them.
If you are ready to take steps to help maximize your company’s retirement plan options, reach out to us at Tide Creek Financial. We’re happy to help you increase retirement value for your team!
Neither MML Investors Services, LLC nor any of its subsidiaries, employees or representatives are authorized to give legal or tax advice. Consult your own personal attorney legal or tax counsel for advice on specific legal and tax matters.
Securities and investment advisory services offered through qualified registered representatives of MML Investors Services, LLC. Member SIPC (www.SIPC.org). Tide Creek Financial Group is not a subsidiary or affiliate of MML Investors Services, LLC, or its affiliated companies. Supervisory Address: 11350 McCormick Road Exec PL IV Suite 200, Hunt Valley, MD 21031. (410)785-7654.
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