Creating Successful Retirement Programs

programs, and shift to a message of “successful retirement savings”.

America has a retirement savings problem: the savings shortage is estimated to be $6 billion. Employers may think that this isn’t their problem, but consider what happens

The first action step is for employers to adopt automatic enrollment. Automatic enrollment assumes participation unless the employee voluntarily opts out, thereby setting

when an employee wants to retire but isn’t able to afford retirement. Unfortunately, the employer pays the price with lowered productivity and morale. There are abundant stories of employees who have “retired in place”—sometimes referred to as RIP employees—those who have retired but remain on the company’s payroll.

a new expectation that every employee will take part in the plan.

So what can employers do to ensure that their employees have adequate retirement savings so that they can choose when to officially retire and depart from the payroll? The current primary retirement savings vehicle is the employer-sponsored 401(k) plan, so it’s not hard to conclude that these retirement programs are failing. As the workforce ages, the problem becomes even more immediate. How do organizations keep employer-sponsored retirement plans adequately providing for their employees when they are ready to retire? Employers should change their approach in how they offer and communicate retirement savings

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The second step is increasing the level of employee deferral used for automatic enrollment to a realistic percentage that will create an opportunity for a successful retirement. Since a three percent deferral is unlikely to provide for adequate retirement savings, organizations may consider opting for a higher rate, say, 5 – 6%, that is appropriate to start successfully saving for retirement. The third step is increasing the deferral percentage each year until an optimal level is achieved. Increasing from a base of 6% to a maximum of 15% over several years will provide for a more robust retirement balance. The optimal level should be aggressive as the participant has the option to stop the increase at any time. Creating an aggressive deferral percentage goal aligns with the “successful retirement savings” message. The fourth step is adding a matching contribution, or “stretching” the current

matching formula. An employer matching

Party Administrators (TPAs) and Financial

provision is the best way to communicate that employees’ retirement savings is a partnership between them and your organization. Many 401(k) plans require a participant to contribute as little as 3% - 5% to earn the full matching contribution. To create a “successful retirement savings” partnership consider “stretching” the match formula to require a 6% - 8% contribution by the

Advisors—about plan design and communication changes, and encourage their involvement in helping build a strategy that will produce “successful retirement savings” for employees. Consider changing the name of your 401(k) plan, which may be an afterthought and thus generic, to “Our Company’s Successful Retirement Savings Plan” ensuring that all materials produced for

participant to receive the fully matching contribution.

your participants will spell out the goal of the plan front and center.

Adopt “successful retirement savings” as the goal of retirement plans and use it as the basis of communications to employees. Notify your partners—Third

Take this initiative now. Your employees’ success, both while at work and when retired, is counting on it.

Kushner & Company’s mission is to help organizations “transform the workplace”—beginning with the recognition of the leader’s vision. Our consulting and administration teams approach every opportunity with that vision in mind by learning as much as possible about the organization and industry. Our specific areas of expertise include HR Strategy, Organizational Development, and Total Rewards Consulting and Administration, including Health Care Reform (PPACA).

For Your Benefit articles are provided as a service by Kushner & Company for the exclusive use of our clients and subscribers and should not be construed as legal or tax advice. If you would like to speak to someone about any of our services for your organization, please contact us at [email protected] or 800-KUSHNER, ext. 412 or visit www.kushnerco.com

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