| Your 401(k) Plan is a Recruiting Magnet | |
Best Recommendations for Employers
By Susan M. Heathfield
What You Need to Think About as You Look Into a 401(k) Plan
There are four key questions you need to ask as you explore your options for a 401(k) plan. Additional resources that will help you explore options are here.
- You'll want to know what the plan will cost you to implement. Considering the percentage of employers who offer
some kind of funds match for employee contributions, you'll want to consider this factor as well. Take a look also at whether you have employees
who make substantial salaries and who are likely to contribute to the plan.
- You will want to discover how much time and effort the plan will require from you to set up and manage. Different choices relative to plan
choices and administrators will impact this.
- You will want to explore the investment options that are available in any plan you consider. Recently, I surveyed plan options
that ranged between eight and thirty-some investment choices.
- You want your plan to serve as a recruiting magnet for the best possible employees. Consider carefully how the plan will meet your business purposes and objectives. Consider how your plan will fit with the overall compensation package you offer your employees. Think about how you will use and publicize your plan to attract and retain outstanding staff.
Recommendations for Employers With 401(k) Plans
You can maximize the impact of your 401(k) plan to benefit the people you employ. These necessary and recommended actions will help you create an appreciated, valued benefit that helps you achieve your business goals.
- The most important advice I have to offer you comes from Bruce Pfau and Ira Kay who authored The Human Capital
Edge. They emphasize that benefits become valuable when employees understand their benefits and the value of their benefits.
According to Pfau and Kay, "The companies that get the biggest return on their investment in these programs are those that
also commit resources to making sure employees understand those benefits and their linkage to a company's desired culture.
Shareholder value and employee commitment are markedly higher at companies whose workers know how much their package is worth
and what their benefits mean to them personally." (page 153)
- The same study found that targeted communications and specific advice about the company's 401(k) plan is just as likely
to convince employees to save for retirement as is a high employer contribution match. "A recent study examined 401(k) plans
at 15 U.S. firms, ranging in size from 700 to 10,000 employees. Employees who received targeted 401(k) communications
saved two percentage points more of their pay than those who did not. Raising match rates from 25 to 100 percent achieved
exactly the same effect -- but at considerably higher cost to the employer." (page 154)
- Human Resources professionals need to know everything possible about the organization's 401(k) plan and other benefits.
Employees need frequent communication about the design and value of their benefits package. They need information about
why your organization offers the particular set of benefits that it does. They need to know what the benefits cost the
employer. They need to know the corporate culture and strategy that your particular benefits package supports. Education and
communication about the 401(k) and other benefits is ongoing and frequent in companies that use their benefits to their
competitive advantage in attracting and retaining staff.
- Keep your company in the forefront in your industry by staying in touch with the benefits your competitors are
offering. 401(k)s and other retirement plans were once unusual; they are now expected.
- Especially if your 401(k) allows individual employees to select their investment choices, you need to make available
ongoing information about investments, in general. Classes, online courses, speakers at brown bag lunches, and written
material and booklets can educate your employees about saving, compound interest, the stock market, bonds, and mutual
funds. Show your staff what their retirement benefits will look like if they begin to save earlier in their careers. Provide
the information necessary to make your employees knowledgeable consumers.
- Send out quarterly announcements that it is time for staff members to take a look at their 401(k) and perhaps tweak their investment allocation. Continue to educate your employees about risk, investing, and paying attention to their retirement savings. In the long run, they'll remember working for you with pleasure and thank their lucky stars they had good advice and information when they were laying the cornerstone for their future economic success and happiness.
Copyright 2002 by Susan M. Heathfield
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