“Getting It Right”: 5 Elements of Effective Plan Design. We know that chief among American workers’ worries is whether or not they have enough money saved for retirement. And their stress levels are higher than previous generations’ because many are behind on their savings compared to their age and where they are in their careers. To wit, BenefitsPro cited various statistics in a recent article:
- Some 83 percent of Americans worry over their ability to retire given current economic conditions, and 70 percent think it’s harder to retire today than in previous generations, according to the National Institute on Retirement Security.
- The Insured Retirement Institute found in 2016 that only 24 percent of Baby Boomers are confident they have sufficient savings to last them through retirement, down from 36 percent in 2012.
- A Transamerica study found that only 12 percent of Gen Xers are confident of a comfortable retirement.”
Needless to say, as a plan sponsor you have the tough job of making sure not only do you accommodate the needs of employees across a broad swath of demographics with a wide variety of financial obligations and concerns. So how do you “do it right” and accommodate employees’ needs today while also making sure they’re financially prepared for retirement tomorrow?
In its article, BenefitsPro suggests focusing on what you CAN control — plan design — and the best and most effective elements of it, including:
- Evaluating and benchmarking your plan investments and the firms that offer them. Do your due diligence. Review fund types, performance and fees, along with the quality of the firms’ participant communications and customer service. Vet no fewer than three prospects.
- Forecasting and budgeting: Make sure your enrollment projections match the reality, and that you budget accordingly to meet your matching commitments and other expenses.
- Auto-enrollment and auto-escalation: Defaulting employees into the plan and raising their contributions at regular, consistent intervals removes much of the friction from the retirement savings process, significantly boosting plan participation and savings rates.
- Compliance testing: Make sure your plan has clearly defined eligibility and contribution guidelines, and that you test regularly (i.e., limit and non-discrimination tests) to ensure your plan adheres to the rules and existing regulations.
- Consider offering supplemental benefits to help employees save as much as possible and maximize all of their options for doing so.
“Getting it right” may sound like a big list of tasks and responsibilities, but constructing and maintaining a plan that meets the diverse needs of your employee demographics and helps improve their retirement outcomes across the board is well worth the extra time, consideration and effort. Oh, and ultimately, it helps make your job easier, too.
