401k Plan Best Practices can be the Foundation for Building a Better Retirement Plan
401k plan best practices are much more than just a group of industry buzzwords. 401k plan best practices are an ideal starting-point for plan sponsors who are looking to breathe new life into existing 401(k) or 403(b) plans. When planning to make retirement plan improvements consider listening to what the employees want. Then respond by implementing appropriate features that are reflective of the employee feedback.
That’s exactly what Jodi Budnik did when she signed on as Optanix’s senior vice president of talent. As recapped in Employee Benefit News, the technology company was having difficulty attracting and retaining talent. As Ms. Budnik talked to employees and discovered many were unhappy with the 401(k) plan. There was no employer match, and the participation was only 35%-40%.
As we know, a good retirement plan is a primary benefit tool that employers can use to recruit, retain and motivate talent. Employees’ value that benefits — a lot. A recent Transamerica study points out that 60% of workers rate their employer’s retirement plan offering as “very important.” That survey found that “good” plans tend to share common characteristics, such as a company match and an automatic contribution escalation feature. Each of these is 401k plan best practices for plan fiduciaries to consider.
When reviewing the results of an employee survey, Ms. Budnik recognized that Optanix’s 401(k) plan needed a makeover. She benchmarked the company’s plan against a group of peers and put together a data-driven analysis that highlighted the importance of offering a solid retirement plan benefit. Leadership signed off, and the company intends to roll out a new plan in January. The new version will offer automatic enrollment to all new hires, as well as automatic re-enrollment to the company’s 325 employees. Optanix also recognized the need to offer a 50-cents-on-the-dollar match up to 6% of pay, with a two-year vesting schedule. These two improvements are anticipated to double the plan’s current participation rates.
Optanix also plans to introduce another one of today’s 401k plan best practices – a financial wellness program. By enhancing the plan, with a formal financial wellness program, the company’s fiduciaries are staying on-top-of their fiduciary responsibilities. This should ultimately improve employees’ retirement readiness. Another one of today’s 401k plan best practices in the interest of favorable outcomes for plan participants.
Ms. Budnik had this advice for employers: when assessing and updating your benefits package, remember, patience is the name of the game. It pays to be thoughtful concerning the enhancements and all involved must recognize that they aren’t going to happen overnight. It’s good to build on the foundation that a plan already has. In most cases, there is no need to reinvent the wheel.
When either implementing a new plan or making improvements to an existing one, don’t just “set it and forget it.” Keep a watchful eye toward the future to ensure that any changes are accomplishing the goals they were intended to meet. Having an expectation of results makes it easier to recognize when newly implemented 401k plan best practices are contributing to the intended outcomes and what corrective action may be needed.
Optanix’s employees were receptive to the 401k plan best practices being made to their 401(k) plan. In fact, many were excited. Could you foster that kind of excitement about your organization’s retirement plan? What kinds of changes could you implement to help make the plan more appealing for new hires and your existing workforce?
If necessary, your organization’s retirement plan can be revived, even revitalized like Optanix did with its 401(k). With careful design, research, thought, planning, and patience, you can help enhance your company’s current benefits program, boost participation, and improve retirement readiness, all while making your employees happier. By implementing just a few industry 401k plan best practices, a firm could make their plan more attractive to the employee base. Thus, leading to better recruitment, retention, and overall employee productivity while contributing to the company’s bottom line. All by taking the appropriate steps to move closer to known 401k plan best practices. That leads to a very good outcome for everyone!
