3 Ways to Align Plan Success with Business Success
How do you evaluate the health of your retirement plan? Historically, retirement benefits have been measured by a set of finite metrics, such as overall participation, contribution rates, and even participant outcomes.
What if this year, you could align your retirement plan success with overall business success? Below are three key objectives Plan Sponsors can look to in order to better define, measure and evaluate performance and engagement goals for their plan, as well as recruiting and retention objectives.
Participation rates can provide a high-level view of the number of employees taking advantage of a 401(k) plan. However, they don’t provide any insight to the actual drivers of satisfaction, success, or where the program can be improved. Often, these data points leave crucial information or context out of the picture.
According to a study by the Transamerica Center for Retirement, 72% of employers believe workers don't think about retirement until their retirement draws near. But, only 40% of workers reported that this is true.1 In fact, over 70% of Millennials – the majority of today’s workforce — say they want more information and financial advice from employers on how to achieve their retirement goals.2
"Over 70% of Millennials – the majority of today’s workforce — say they want more information and financial advice from employers on how to achieve their retirement goals"
For Plan Sponsors, having a good understanding of the challenges the workforce is facing and what’s top of mind for their employees can inform how the plan is structured, how it’s scaled, and what supporting services can be offered to provide value.
Consider running a survey to segment employee cohorts and gauge satisfaction around current offerings, outreach strategies and communication tools. This can also help identify groups of employees who may be underinvesting in their retirement plan so that communications can be tailored to meet their needs.
Using survey data, you can then take inventory of what’s working and what’s not working with the retirement resources offered. This includes all participant-focused education, content, and tools.
A recent study from the Society for Human Resource Management (SHRM) found that organizations leveraging benefits to recruit and retain employees are nearly twice as likely to have more satisfied employees and to report better business performance compared with organizations that are not strategic with benefits.3
The importance of retirement benefits in talent acquisition and retention strategies is well known, with nearly 81% of workers saying that retirement benefits make up a major portion of their job search.4 The other side of the coin is just as powerful: 29% of employees cite their overall benefits package as a top reason to look for a position outside of their current organization in the next 12 months.5
"29% of employees cite their overall benefits package as a top reason to look for a position outside of their current organization in the next 12 months."
Chances are, some of your employees are not aware of the full suite of benefits offered through your company plan. Once you have some survey data to support a baseline of employee engagement and satisfaction, you can put those findings to work. This year, consider focusing on educating participants around the retirement benefits available to them to increase engagement and the potential for them to maximize their outcomes.
Whether through learning seminars, blog articles, or planning tools, taking advantage of educational and engagement opportunities from your provider is a valuable differentiator. As a plan sponsor, you can talk to your Financial Advisor about content pieces they are already creating that you can disseminate to your employees to boost plan involvement.
Rethink the cadence, delivery, and approach to communications around your retirement plan. Using data from the survey and the identified gaps, consider crafting an outreach approach that is specific and targeted to both individuals and key moments during the year.
For example, high employee engagement during open enrollment offers an opportunity to build momentum around retirement benefits, as well. Or, consider communication about retirement benefits when others are talking about it during the official Retirement Planning Month in July.
If you’re running point on your company’s retirement benefits, you can take pride in your hard work contributing to overall business success. In fact, organizations that use benefits as a strategic tool for recruiting and retaining talent reported better overall company performance.6
This isn’t a secret, though: 95% of businesses offer some sort of retirement benefit to their employees.7 How can you finesse your retirement plan design to make sure you’re outpacing your competition?
This year, it may be more important than ever to understand how plan utilization can boost the health of a retirement plan. Automatic enrollment is an example of a simple tool influencing overall participation: in a recent survey, participation rates triple to 91% under automatic enrollment for new hires, compared with 28% under voluntary enrollment.8
"Participation rates triple to 91% under automatic enrollment for new hires, compared with 28% under voluntary enrollment."
That said, relatively few small company employers use features known to boost participation and savings in retirement plans; only 14% of small businesses with a plan that is 3 years or younger use auto-enrollment and, of those, just 37% make automatic contribution rate increases default.9
This year, consider setting a goal to take advantage of all the quick wins plan design and strategic communications can offer.
Automatic enrollment, especially when using an opt-out approach, can help make sure more eligible employees are participating in your retirement plan. Additionally, features like auto-escalation or automating catch up contributions can help employees increase access, which, even if they're not in a position to hit their contribution limit, can make a big difference in building wealth over time.10
Incentives can be a great tool for driving employee engagement. Setting company or department level competitions (e.g., a savings or participation goal) can offer a fun challenge that brings employees together in their savings efforts. This sense of community can not only help increase savings behaviors, but also build team morale around the shared experience.
Measuring the success of effective retirement benefits goes well beyond participation rates. By aligning plan design, goals, and metrics to your business goals, you can leverage the retirement benefits in other parts of your business. Connect with a Morgan Stanley financial advisor to learn how you can measure and monitor the effectiveness of your plan engagement to help ensure employees and your company are getting the most out of retirement benefits. When making changes to plan structure and design, please discuss with legal and tax advisors.