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401k Auto-Enrollment Immediately Helps Employees

401k Auto-Enrollment Immediately Helps Employees

401k auto-enrollment immediately helps company employees to start saving for retirement.  Knowing that “time and compounding” are big contributors to the success of qualified retirement plans – it is surprising that more plan sponsors do not make 401k plan participation available immediately.  At the conclusion of a Plan Sponsor University (TPSU) Fiduciary Education Program held at a Georgia State University in Alpharetta, Georgia, TPSU Founder, and CEO, Fred Barstein spoke with Kim, a TPSU Program attendee. As the Senior Vice President of Human Resources at her approximately 175-employee organization, Kim is responsible for the tax-qualified retirement plan. Kim has successfully implemented immediate auto-enrollment for the 401k retirement plan, and it has been well received within the organization. Learn how Kim improved the plan and how it has been measured as a success for the company and the plan participants.

Full Transcript Here

Fred Barstein:
This Fred Barstein with 401k TV in Alpharetta, Georgia, where we just completed a TPSU program at Georgia State University. I am here with Kim. Welcome, Kim.

Kim:
Hi, thank you.

Fred Barstein:
Okay if we ask you a few questions?

Kim:
Absolutely.

Fred Barstein:
Okay. Before we do, why don’t you tell us a little about yourself and the size of your organization?

Kim:
Okay. My name is Kim. We already established that. I’m Kim and I have been with the same organization for 27 years.

Fred Barstein:
Wow.

Kim:
I know. We are a property management company here in the Atlanta area. And I have about 175 employees currently.

Fred Barstein:
And what’s your role?

Kim:
And I’m the senior vice president of human resources.

Fred Barstein:
Senior vice president.

Kim:
Yeah. Well, 27 years. So been a long… I earned it.

Fred Barstein:
There you go. You did. So today in the class a TPSU, you did automatic enrollment, which is becoming more common, but you did a little bit different. Tell us about how you do it.

Kim:
Well, we started it probably five years ago and the initial reason that we started with automatic enrollment was to attract and retain new employees. But what happened was an even better side effect, and that was the employees who were automatically enrolled in the plan, who may not have ever enrolled in the plan initially, stayed in the plan versus opting out of it. So it’s kind of grown organically and no one’s questioned it. No one that’s automatically enrolled rarely drops out of the plan because they don’t miss the dollars from their first paycheck.

Fred Barstein:
Because you’re doing it right away.

Kim:
We’re doing it right off the bat. And because of that, they’re not getting several months of pay if they had a waiting period. So when you start it right off the… from the first day that they start, they don’t miss the money coming out of their paycheck. And I think that’s always been one of my hardest struggles with trying to get people interested in participating in a 401K plan is they’re worried about how much money is going to come out of their check. So if you start it off initially and they don’t miss it, they don’t think about it. So it’s been a really good program for us.

Fred Barstein:
And usually, when somebody moves jobs, they might be getting a little bit more money. So it’s not… And so, a couple of things that you want to… that you learned in the class that you may want to take back and institute?

Kim:
A lot of the things I’m already doing, which made me feel good about the way our plan’s operating and about how we’re providing what we need to be providing to our employees. One thing we do struggle with is our highly compensated employees are limited due to the number of non-highly compensated employees in the plan. So our highly compensated employees are limited to a 5% contribution, which that doesn’t… you can’t retire on that. So one of the things that I’m taking away from today’s program is I’m going to look into establishing a Roth IRA within our 401K plan for our high comps. Yeah.

Fred Barstein:
And maybe non-qualified plans.

Kim:
And the non-qualified plans, yeah.

Fred Barstein:
Well, thanks for your time today.

Kim:
Thank you. Appreciate it.

Fred Barstein:
And thank you for watching 401k TV. Stay tuned.

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