Retirement Plan Coverage Elusive for Many
Retirement plan coverage is not where it needs to be. Many American workers do have access to qualified retirement plans however, retirement plan coverage falls short of what is required to take-care-of the masses.
There are still employees who do not have access to an employer-sponsored retirement plan; however, they are beginning to have more options. Ten states, including New Jersey, are currently rolling out plans to help small business employers battle the retirement plan coverage issue. These states are encouraging their employees to save in state-sponsored plans via payroll deductions.
Workers who do not have access to an employer-sponsored retirement plan — or who think they don’t because they have not heard any conversations about it — are more apt to seek jobs elsewhere with better benefits. Employer-sponsored retirement plans represent powerful recruiting and retention tools for the companies who offer such plans. Employers should make an extra effort to speak with existing employees, new hires and candidates about their employer-sponsored retirement plans. Tax-qualified retirement plan coverage has become a popular way for a majority of Americans to save for the future. Americans often take for granted a qualified retirement plan being offered in the workplace. Most employees are aware of it, but not everyone. A recent study reveals that everyone may not be aware of the company’s retirement plan coverage.
This may come as a surprise to employers, but, according to a survey conducted by research firm Morning Consult, for the Certified Financial Planner Board of Standards and cited by NerdWallet, 3 out of 10 workers do not know if their company offers an employer-sponsored retirement plan!
Do workers not know if their company offers an employer-sponsored retirement plan because they actually don’t offer such plans? After all, as the Nerdwallet article points out, Bureau of Labor Statistics data shows that 30% of American workers don’t have access to an employer-sponsored retirement plan, which corresponds with the 3 in 10 figure from the CFP Board survey. Not surprisingly, companies that don’t offer an employer-sponsored retirement plan typically do not usually highlight that fact.
The NerdWallet article suggests employees give their fellow coworkers a “nudge” to help them take advantage of the benefits of employer-sponsored retirement plans. As we’ve written previously, a simple nudge can help encourage positive savings behaviors and help to address head-on any retirement plan coverage issue.
Sometimes, a one-on-one conversation between co-workers can be more impactful and effective than a well-conceived education campaign about the employer-sponsored retirement plan. The NerdWallet article gives an example of a 22-year-old employee who was positively influenced to contribute to his company’s employer-sponsored retirement plan after hearing about its benefits from two older co-workers who’d been long-time participants. He wasn’t thinking about retirement because, to him, it was so far off. That is until his co-workers recommended that he participate in the employer-sponsored retirement plan. In another example from the NerdWallet article, an employee was persuaded to participate in the employer-sponsored retirement plan by the company match. The “free money” was too good for her to pass up. To aid in tackling the retirement plan coverage issue, employers might encourage employees who are avid savers to “talk up” the plan to their peers, either at the water cooler or even during enrollment meetings.
If your employees are not fully aware of your company’s retirement benefits, then those benefits are falling short of their intended purpose. Employers should never assume that new hires, or even that existing employees, have received the message that their company does, in fact, offer an employer-sponsored retirement plan. Every employer should seize every opportunity to educated employees about the value of employer-sponsored retirement plans, as well as frequently communicate with the workforce about how to participate. Of course, making enrollment automatic is a tremendously effective way to boost both participation and savings in employer-sponsored retirement plans. Obviously, defaulting employees into the plan will go a long way towards mitigating any retirement plan coverage issue.
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