Finding Balance: Allocating Resources for Insurance & 401(k) Plans
The allocation of financial resources between insurance coverage and 401(k) plans is an essential consideration for companies. Although there is no one-size-fits-all formula, finding the right balance is imperative. Companies should assess their employee needs, demographics and the types of risks that could present themselves.
Insurance plays a critical role in mitigating unforeseen risks, such as healthcare expenses and potential liabilities. Adequate coverage can provide employees with peace of mind and protection against potential financial hardships. At the same time, a well-designed and properly funded 401(k) plan is instrumental in promoting long-term financial security for employees. Companies should aim to strike a balance that ensures sufficient insurance coverage while enabling employees to save for retirement effectively.
Following the conclusion of The Plan Sponsor University (TPSU) Fiduciary Education Program at Westminster College in Salt Lake City, Utah, Founder and CEO Fred Barstein engaged in a conversation with Adjunct Lecturer Kirk Welch about the inability of employers to sometimes see the benefits of investing more financial resources into their retirement plans.
Read the Full Transcript Here:
Fred Barstein:
Fred Barstein with 401kTV here at Westminster College in Salt Lake City. I’m here with the adjunct lecturer for TPSU, where we just completed a program, Kirk Welch. Welcome, Kirk.
Kirk Welch:
Thank you.
Fred Barstein:
Kirk is from MRP Retirement, which is now part of HUB International, which a large employee group, and they’re one of the largest, most successful retirement practices in the country, certainly in Salt Lake City. They’ve got a tremendous client base and really, really great results from their clients. Welcome-
Kirk Welch:
Thank you.
Fred Barstein:
… to TPSU and to 401kTV. One of the things you brought up was how much money we spend on insurance and relative to retirement and how much company spends. How do you position that with your clients?
Kirk Welch:
Well, we find that some of our HR partners and maybe even some finance executives inside of the entity sometimes have a hard time discussing with their CFO or their CEO the idea of maybe either implementing a match or increasing their match. We try and help them understand that they’re allocating a heavy amount of dollars. Let’s just use the example of a medical plan. They spend thousands of dollars a month per employee on a benefit that they hope they never use. If nobody uses the insurance for the year, everybody’s happy, and yet they’ve allocated more than likely millions of dollars to that benefit. Yet we see a CFO or a CEO bilk at the idea of increasing their match for a benefit that they hope the employees will someday use. In fact, we find that in most cases an increase in match is less per year than what they would normally allocate per month to their medical insurance plan. Sometimes framing it in that way helps a CFO or a CEO to think a little bit differently about where they’re allocating their dollars and how efficiently they’re being used.
Fred Barstein:
I think also one of the things you brought up, which is the advisor needs to be an advocate, you know?
Kirk Welch:
Mm-hmm.
Fred Barstein:
Because just because it’s the right thing to do, it doesn’t always happen. What do you do as an advocate for your clients?
Kirk Welch:
Yeah. We’ll usually provide them with an analysis and we’ll come in and actually support the sale, support the discussion with the CFO or the CEO as opposed to making them go it alone. Not many of them feel very comfortable doing that, making that pitch to increase a match or enhance an employee benefit to make the company a little more competitive maybe in that area, so having us there is a big support [inaudible 00:03:12].
Fred Barstein:
Showing what peers are doing because it is about retention and recruiting, right?
Kirk Welch:
Yeah. Especially here. I mean, in Utah you have an unemployment rate that sits at about 3%. It is very competitive, and especially in the tech space so we do like to utilize other entities that are like our client entities to really prove out that this is something that they need to do and something that will be beneficial for their employees.
Fred Barstein:
Final question. This was your first TPSU. How’d it go? How did you enjoy it?
Kirk Welch:
We loved it. We had great attendance, we had good participation. The format really promotes an educational environment as opposed to what some of these become, and that’s a big sales pitch for one entity or another. We’re appreciative of the support and appreciative of the structure [inaudible 00:04:02].
Fred Barstein:
Being at a college is different.
Kirk Welch:
Amen. Amen. Yeah.
Fred Barstein:
It’s very, very different. Well, good. Well, thanks for your time and thanks for participating in TPSU. Thank you for watching 401kTV. Please stay tuned.
