Employers agree that retention and attraction of quality employees is one of their biggest goals in the HR department.
Popular belief tells us that a benefits package including group retirement is one of the tools used to attract and retain employees…but is it?
Simply put, yes.
A Standard Life study conducted by Environics Research Group in fall 2012 found that 92% of employees at small- to mid-sized companies ranked “workplace savings and retirement plans” as an important factor in remaining with their employer. An earlier Environics study found that 41% of those employees would consider moving to an employer that offered some form of retirement or savings plan if one was not offered to them currently. Conversely, the same 2012 study first mentioned above found that 69% of executives at those small- to mid-sized companies ranked those same plans as only the seventh most important benefit in attracting and retaining employees.
The reason employees find group plans so appealing may be that many don’t save for retirement outside of the workplace. Even for some higher wage earners, the company-sponsored retirement plan is their main source of retirement savings. It’s little wonder why employees find a group plan so appealing.
For employers considering implementing a plan and for employers who have not reviewed their plan, the following points help to build a more appreciated group retirement plan:
Define the goal of the plan—Many employers put a plan in place and never look at it again. If a goal for the plan is established and progress is monitored it’s easier to see how well the plan is performing for its employees.
Don’t provide too many options—Many studies have shown that too many options for employees cause apathy. Provide a modest set of fund choices and keep the plan structure simple.
Choose an appropriate default fund—Many employees don’t want to make an investment choice. If a default option is established a member not wanting to make a choice can still be invested appropriately. Target-date funds have become very popular for this.
Provide employee education repeatedly—One session of employee education at the onset of the plan is inadequate for employee training. Initial training is very important but so is ongoing training. The training should also be offered in different forms to the employees. Some employees may prefer web-based education while others like face to face. Group settings may not be a comfortable learning environment to all employees so individual sessions should be offered as well.
Consider your plan provider—There are differences in the in-house plans offered by plan providers. These should be considered for investment appropriateness as well as results. Experience has shown the majority of employees will choose the in-house, target-date and target-risk funds as their primary investment. Most plan providers offer similar third-party investment options that are quality investments. Management fees and service offerings should be compared to offer employees the best value.
It’s widely agreed that company-sponsored group retirement plans do help in attracting and maintaining employees. If a company doesn’t have a plan, it may be time to ask why. And if a company has a plan that’s been ignored, it may be time to revisit. Many plans can be set up without much headache and the cost to the employer can be surprisingly low compared to the cost of finding new employees to replace the ones that have left your organization.