Attracting Talent

When employees are unprepared for retirement, what effect does it have on your company’s bottom line?

Every healthy society works to take care of its own people; in a corporate environment, this includes ensuring the long-term financial security of employees by implementing a proper financial planning program. However, while nearly every company has such a program, a staggering 92% of Americans are nonetheless unprepared for retirement.1

When the Employee Retirement Income Security Act (ERISA) was first enacted in 1974, it was a 200-page labor document; today, it has grown to over 700 pages of legislation and over 3,600 pages of regulations. Business owners and human resource managers alike appreciate the reality of abiding by ERISA; however, staying on top of its ever-changing regulations can be a full-time job in and of itself! Companies are having to take on more and more fiduciary responsibility, all the while dealing with matters of employee readiness and engagement. The effects of this tug-of-war have begun to show in the bottom line of companies across a wide range of economic sectors.

Now more than ever, it is important for businesses to educate their employees, and it is vital for them to offer retirement programs and advice to help those employees reach a satisfactory retirement.

The 411 on Employer-Sponsored Plans

Offering your employees a 401(k) plan is a good start, but it’s simply not enough on its own: a recent retirement confidence survey revealed that 2 out of 5 employees were “not too” or “not at all” confident that they would have enough money for retirement.2 Even with the best of intentions, things can go badly for both plan sponsors and their employees if they don’t put measures in place to ensure they get the absolute most out of their retirement plans. Such measures include:

  • Auto-Escalation

  • Company Matching

  • QDIAs

A company’s success can hinge greatly on their ability to prepare their employees for their financial futures. One survey found that 6 out of 10 employers cite retirement benefits among the top factors that help attract new talent (59%) and create employee loyalty (58%);3  In other words, companies with a solid financial plan are positioned to attract the best and brightest out of the current labor pool.

Human resource managers can attest that an effective employer-sponsored plan can greatly improve recruiting results; furthermore, it can lead to higher retention rates over time, potentially improving the company’s overall bottom line.

Employee Satisfaction is the Key

In addition to making a company more attractive to new talent (and more likely to hold onto existing talent), an effective retirement plan can provide an invaluable boost to employees’ job satisfaction and work performance.

Fact: people stress all the time about money. Not just what they have today, but what they and their loved ones will have tomorrow. Even a well-paid employee with a steady job will find themselves wondering: “what will happen to me and my family when I finally retire? Will we have enough money to keep living as we currently are?” An effective employer-sponsored retirement plan coupled with the financial education needed to get the most out of it is the key to alleviating that stress.

But why stress about stress in the first place? As it turns out, around 83% of employee management professionals agree that financial turmoil has an impact on job performance4 – that is, the more stressed employees are about their present and future financial state, the worse they do at work. Conversely, the more safe and secure they feel in their financial situation, the better they perform. It’s simple logic, and it holds true in every sector: safeguarding employees’ financial futures is a proven way to get them to work better and strengthen your company’s bottom line.

An employer-sponsored 401(k) plan can help employees feel more confident in their financial futures so they can focus more on their roles and responsibilities within the company. However, implementing an effective plan and getting employees on board is yet another challenge to overcome!

Key Steps in the Process

One of the key elements in the puzzle that is employee retirement preparedness is the fact that many employees simply don’t know much about the retirement plan(s) their own companies offer them. This status quo will take effort to change: you can start by promoting your company’s plans through an ongoing retirement awareness campaign. Your human resources department could offer financial education programs, personalized help, and retirement planning assistance. You could also make an effort to highlight your program to prospective employees and new hires.

Many companies choose to work with an outside advisory team to help them meet their fiduciary responsibilities. Partnerships like these can help reduce liability exposure and add an extra layer of risk management mitigation. Experienced fiduciary advisors can also help employers feel more confident in their retirement decisions and that a prudent process is in place.

One final thing to consider, employers should try to make enrollment an easy, simple process. Every hurdle your employees have to overcome to enroll is another source of stress for them to deal with. Giving employees a clear path to life after work and a way to take control of their financial futures will go a long way towards increasing their confidence in their company.

According to a 2015 study by WBR, employers increasingly believe that workplace financial solutions lead to employees being more satisfied, more loyal, more engaged, and more productive.5 With employer confidence on the rise, it’s hard to deny that a solid company retirement program provides benefits to both employees and the company. Employees who feel less stress about their financial futures are more likely to stay in their jobs and perform them more efficiently.