Employee Education Tools You Can Use. If your organization offers different types of benefits like a traditional 401(k), a Roth 401(k), and a health savings account (HSA), your employees might be unsure about how and when to use them. Additionally, another benefit that causes confusion is employer retirement plan matching contributions — many employees don’t take advantage of it, leaving “free money” on the table.
CNBC recently put out a video and article (see HERE) that may help clear up some of the confusion and make it easier to communicate to employees about the perks of these benefits. Just shy of two minutes long (short, sweet and to the point — perfect for a benefits education presentation), the video covers the basics of how much to save (ultimately, 10-15% of income), where to put the money, types of savings accounts available, and the tax implications of each.
While the video focuses on traditional 401(k)s, IRAs and HSAs as the three primary savings options, the information presented could easily be applied to a Roth 401(k) as well. It walks viewers through the different types of tax considerations:
- 401(k)s are funded with pre-tax dollars and the savings and any investment earnings on them is taxed when the money is taken out at retirement,
- for IRAs (or Roth 401(k)s), dollars go in post-tax, and therefore, no taxes are paid at retirement,
- and pre-tax money goes into health savings accounts (HSAs) and can be used for applicable health-related expenses. Bonus: the account owner is not required to pay taxes on the withdrawals.
The CNBC video is based on tips from a financial advisor, and it breaks down saving for retirement, and the different ways to set money aside, in easy-to-understand language with clear, attractive visuals. Since it’s consumer-oriented, the video could easily be posted on a benefits portal or used in an enrollment meeting. It could also be sent directly in an email campaign to employees who aren’t currently contributing to help improve their understanding of available benefits and, hopefully, convince them to start setting money aside sooner than later for future financial needs.
CNBC also details the benefits of taking advantage of employer matching contributions in a retirement plan. Again, it’s written from the consumer angle, but it clearly explains the reasons why employees should consider making the most of this powerful benefit to help them grow their retirement savings. For example, if your organization matches employees’ contributions dollar for dollar up to 3% of their pay, and they contribute 3% of their salary to their retirement account, making them eligible for the match, it essentially doubles their contribution.
As a sponsor, of course, you know that employees should contribute at least enough to the retirement plan to be eligible for the match, but most don’t take full advantage of the opportunity. A 2017 survey from 401(k) provider Betterment for Business found that nearly a quarter of Americans who are currently contributing to a 401k plan aren’t optimizing their employer’s matching contributions.
What’s more, 89% of those Betterment surveyed were offered an employer match in their 401(k), but 23% didn’t take full advantage of it. Among that 23 %, 16% didn’t max out the match, and 7% didn’t even know if they got the full match or not.
The video and article are helpful tools you can use to educate employees about the advantages of the different types of benefits your organization may offer. They explain simply and clearly how workers can make the most of their pre- and post-tax dollars, along with taking advantage of employer matching contributions, to optimize their savings and help them be better prepared for retirement.
