Setting up a retirement plan for your organization was no small task. Then to see a lack of participation in your plan could be discouraging. Unfortunately just because you have provided the plan, that doesn’t mean your employees will just automatically participate in it. Here at Envoy, we want to see your plan succeed so here are 5 tips you can use to help increase your plan participation!
1. Automatic Enrollment
Choosing to automatically enroll all new employees in your retirement plan can dramatically improve your participation rates. According to the Center for Retirement Research (CRR) at Boston College, in one study of automatic enrollment, participation increased by 50 percent, with the largest gains among younger and lower-paid employees. While auto-enrolled employees are allowed to opt-out of the retirement plan, most generally stay enrolled. Another recent Vanguard survey of 8,900 small business retirement plans found a dramatic effect of automatic enrollment on employee participation rates: 83% with automatic enrollment versus 58% without.
2. Adopt Auto-Escalation
Plans that use auto-escalation automatically increase their participants’ contribution rate every year, typically by one percent. Over time, that can significantly improve savings rates among workers. The Center of Retirement Research cites a 2013 study of Danish workers that the majority of workers who experienced automatic increases simply accepted them, and savings rates dramatically increased. Also when the assets get in the plan get bigger everyone benefits with lower costs.
3. Provide Target-date Investment Products
Investing is complicated, and many employees don’t want to take the time to learn how to manage their portfolios. Target-date strategies automatically adjust an employee’s investment allocations over time, shifting them to a more conservative asset mix as the target date (typically retirement) approaches. Target-date funds have increased in popularity in recent years due to their ease of use.
4. The Employer’s Match
One of the best ways to motivate participation is with “free” money. The Employer’s Contribution Match is essentially that. In fact, if your employees are not taking advantage of your contribution match they are throwing away free money. We highly recommend constantly reminding your employees of your match, especially after they become eligible.
5. Offer Loan & Hardship Withdrawal
Allowing loans and hardship withdrawal options in your retirement plan is another way to increase participation. Many employees may choose not to participate because they think their contributions will be stuck in a retirement plan until they retire. However, by offering loans and hardship withdrawal options you give your participants more flexibility and ease of mind. If you offer loans and hardship withdrawal options remember to consistently remind your employees of this benefit.
While there are many more tips to help increase your plan participation, these 5 are some of our best ones. However, nothing can is better than constant communication with your employees reminding them to participate in your plan and to do it as soon as possible!
Do You Need Some Help?
Envoy Financial has numerous support options. For general questions about your account, please contact our service team at (888) 879-1376. You can also access FREE education tools, resources, and more at EnvoyFinancial.com. Plus, Envoy’s help center is available online at any time. If you would like to review your investments, you can schedule a meeting with a licensed advisor.