FacebookTwitterLinkedInFeed

How Can I Get Employees to Save for Retirement?

Posted on Mar 06, 2012 by  in 401(k) Retirement Planning, Retirement Plans for Business, Retirement Readiness

The most fulfilling part of my job as a Client Relations Manager at TSC is meeting with our clients and their advisors to review their company’s retirement plan.  Lucky for me, 50% of my time is spent doing just that.  In these meetings, I hear many of the same questions and concerns from business owners.  One of the most common questions that I hear is: “How do I get my employees to participate in the plan and appreciate the value of this benefit I am providing?”  This is where automatic enrollment in conjunction with a good education plan can really make a difference.

When the topic of auto enrollment is discussed, there are certain questions that inevitably come up. Does it work?  What if an employee wants to opt out?  Will my employees get upset with me for defaulting them into the plan?  Will I have to play “baby-sitter” with my employees’ retirement savings?  Based on my experience implementing auto enrollment for our clients, here are my answers to these questions:

Does it work?  Yes, it does, and not only for large companies (a common misconception).  Employees that don’t opt into the plan usually don’t opt out – all due to inertia.  This employee behavior has shown to be consistent regardless of the size of the company they are employed by.

What if an employee wants to opt out?  They can do so at any time by completing an enrollment or contribution change form.  In addition, many employers choose to allow an employee to remove the contribution made within the first 90 days of the automatic enrollment.

Will my employees get upset with me for defaulting them into the plan?  While the answer is generally no, I did have a client share an experience with me that I found very interesting.  An employee was defaulted into the plan at a rate of 3%.  The employee was going to opt out of the plan and ask for a refund of the first contribution made; however, upon reviewing the amount deducted and placed into the plan, she decided the amount did not have a significant impact on her take home pay.  Furthermore, she realized that if it weren’t automatically deducted she would never have made the election to contribute for herself and decided to continue to defer into the plan.

Will I have to play “baby-sitter” with my employees’ retirement savings?  You do not need to play baby-sitter if you adopt the auto enrollment provision.  You will need to make sure employees are aware of the provision and distribute the appropriate employee notice and enrollment forms.  From then on it works just as if they had made a positive election into the plan. 

You may have asked yourself many of the same questions as above.  Based on what you have read, could your 401(k) plan benefit from auto enrollment?

Leave a Reply

Recent Blog Entries
    Fiduciary Focus: Tibble v. Edison International and the U.S. Department of Labor’s Proposed Fiduciary Investment Advice Rules
    Fiduciary, a term that is rarely used in everyday conversation, has been garnering a lot of attention in Washington, D.C. as of late. While fiduciary status has long been an important issue to retirement plan sponsors and service providers, with all three branches of government weighing in on fiduciary issues, now is a good time
    New IRS Guidance on Accepting Rollover Contributions
    Qualified retirement plans can generally accept rollovers that were distributed from other eligible retirement plans such as another 401(k) plan, 403(b) plan, governmental 457(b) plan, or IRA. However, certain distributions such as required minimum distributions, hardship distributions, and distributions from an inherited or Roth IRA cannot be rolled into a qualified plan. Prior to accepting
    Safe Harbor Contributions: Changes to Mid-Year Suspension Rules
    The IRS released new regulations in November of last year that changed the rules for suspending safe harbor contributions during the middle of the plan year.  In general, employers cannot make changes that affect the safe harbor contribution during the plan year; such changes must be made before the beginning of the plan year in
    Reaction to the PBS Frontline show “The Retirement Gamble”
    I dutifully watched the PBS Frontline report “The Retirement Gamble” last night.  I am a regular PBS viewer and I know that Frontline is a reliable source for good information, so it was with some trepidation that I anticipated the airing of this particular episode.  I say this because the advance reports on the show
    Impact of Fee Disclosure: A success, a failure, or too soon to tell?
    Over the last several years, retirement plan sponsors and their service providers have spent a lot of time preparing to comply with the DOL’s participant and service provider disclosure rules that became effective in 2012.  Now that the rules have been effective for the better part of a year, many of us in the retirement