With thoughtful design features, you can structure a 401(k) plan that stands out in a time of talent scarcity and meets your employees’ needs.
Looking to attract and retain high-quality talent in today’s competitive labor market? Enhancing your 401(k) plan design could be the answer.
It could increase your employees’ retirement security and financial well-being while motivating talent to join and stay with the company long-term.
With many businesses struggling with staffing issues, savvy executives are realizing that boosting their retirement plan benefits can be a valuable part of the solution. In fact, 35% of employers have already taken proactive steps to stand out from their competitors and ensure their employees remain happy and satisfied.
When it comes to successfully recruiting and retaining top talent, the competitiveness of your benefits package is key. As such, you should consider what employees value most when evaluating and implementing 401(k) plan design enhancements. A 401(k) plan that incorporates features that fit the company’s budget and the needs of your workforce is the best of both worlds.
Automatic Features Make a Difference
Plan design features such as immediate eligibility, automatic enrollment, auto-escalation and frequent plan entry points may help boost 401(k) plan competitiveness and make it easier for employees to save for retirement.
Immediate eligibility means employees can participate in the 401(k) on their date of hire, rather than based on their age or time of service. Then these eligible employees could be automatically enrolled into the plan at a meaningful rate (8–10%). Plus employers who adopt automatic enrollment can claim a tax credit of $500 for the first three years. Automatic entry helps increase retirement readiness, a benefit employers can highlight in the recruiting process.
Going a step farther, employers could auto-escalate employee retirement saving by 1-2% per year until the employee is saving between 10-15% toward their retirement, the recommended savings rate per year by industry experts.
Finally, implementing flexible eligibility requirements and frequent entry points can boost participation rates and enhance overall employee satisfaction levels.
The Match Matters
Prospective and current employees value employer matching contributions. If an employee is considering multiple job offers, all else being equal, companies that offer a 401(k) with a match may have an advantage. It’s no wonder that more than half of employers (55%) are making matching contributions to employees’ retirement accounts.
Employers can help employees understand the value of retirement plan matching contributions by presenting them as part of their total compensation. It demonstrates an investment in your employees’ future, which can go a long way when it comes to attracting new talent and cultivating loyalty among your existing workforce.
Enhance Recruiting with Accelerated Vesting
Many employers have a waiting period for employees to become vested in employer contributions. One-year vesting periods are common; however, some employers delay letting employees vest in the company match and other employer contributions by as much as six years. Immediate vesting may offer more recruiting power than non-immediate vesting schedules. Again, employees considering more than one job opportunity may be more likely to accept one with a company that offers immediate vesting.
Beyond the 401(k): Get Creative
Offering a competitive 401(k) plan shows you’re committed to your employees’ financial well-being while helping them save for the future. Outside of a retirement plan benefit, specific financial rewards for longer-term employees can provide additional motivation for them to stay. These benefits may include restricted stock, cash balance plans and non-qualified deferred compensation plans. Offering creative benefits like these can help boost retention by making more tenured employees feel valued and rewarded while enhancing their total compensation.
A well-constructed 401(k) plan can be a game-changer for companies looking to attract and retain top-quality talent. By investing thoughtfully in plan design and staying competitive with benefits packages, businesses can stand out from their competitors and gain the advantage needed to succeed in today’s challenging labor market.