Ways to Make Saving Easier for Your Employees

February 3, 2020

Employees know they should save for retirement, but it’s not always easy. Many worry they don’t have enough money to put into retirement savings because they’re having difficulties paying bills.

You can help employees save and maximize their savings. As an employer, you are well positioned to remove barriers to saving for retirement and you can provide important retirement education.

One of the ways to maximize employees’ interest in a 401(k) is to structure it to make it more appealing. Talk to a qualified professional, but here are some ideas:

•    Automatically enroll employees into your 401(k) plan. Automatic enrollment in retirement plans has proven to greatly boost plan participation. With automatic enrollment, employees often don’t even think about the money that’s being withdrawn. However, if they do object, they can choose to not participate.

•    If you don’t do automatic enrollment, consider shorter or no waiting periods. Employees are more likely to enroll during their orientation meetings when you have their full attention and can explain the benefits of saving for retirement.

•    No one turns down free money, and employer matching contributions encourage employees to save — and to save more — if they know you also will be contributing and helping their savings grow more quickly.

•    Allow employees to take out loans or hardship withdrawals so they know they can access their money if there’s an emergency.

•    Provide a variety of investment options. The average plan has more than 10 options — but 20 options can be too many and can cause confusion.

Another key factor is communication.

The better employees understand the importance of investing and how it works, the more likely they are to participate in the plan.

•    Hold regular 401k meetings. Quarterly meetings are great opportunities to communicate plan benefits and features. Or, have an investment advisor meet one-on-one to help participants meet their retirement goals.

•    Use emails, newsletters, internet and intranet to provide easy-to-understand messages for employees with different levels of income and financial knowledge.

•    In addition, send personalized statements. These include enrollment materials and other forms of communication. For example, if you are providing enrollment material to 20-year-olds, the ideas and data should be targeted to their life circumstances. Most investment companies can provide personalized communications materials, which help convey the importance of saving as employees watch their accounts grow. According to Watson Wyatt’s latest 401k Value Index™ research, companies that use personalized statements to inform employees about their 401k plan have on average a six percent higher participation rate compared with those that don’t.

•    Many people in debt need help forming a financial plan. Provide budget templates or budget apps to teach employees ways to save. Once the employee has a budget, encourage them to start saving in small increments and then make gradual increases that add up to long-term savings.

•    Encourage employees who think it’s too late to save to contribute the maximum. Provide them with a financial advisor to learn how to earn a higher rate of return. They also may want to consider retiring later as a way to increase their savings.

The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the firm, our lawyers or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. Barrow Weatherhead Lent LLP is not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal questions. © 2023 Barrow Weatherhead Lent LLP. All Rights Reserved.

About Alera Group 

Alera Group is an independent, national insurance and wealth services firm with more than $1.1 billion in annual revenue, offering comprehensive employee benefits, property and casualty insurance, retirement plan services and wealth services solutions to clients nationwide. By working collaboratively across specialties and geographies, Alera Group’s team of more than 4,000 professionals in more than 180 locations provides creative, competitive services that help ensure a client’s business and personal success. For more information, visit https://aleragroup.com/ or follow us on LinkedIn.