401(k) Corner: Increase Employee Savings

Why?

1. Those with a healthier retirement plan are more “present” while working, increasing efficiency.

2. Larger balances per employee allow fixed costs (administrative, audit, etc.) to be spread over a larger asset base, creating cost savings for everyone.

How?

1.) Communication- Stress the importance of retirement savings. Employees don’t know that the rule of thumb is a 15% contribution to be able to replace 50% of their income at retirement unless you tell them; repeatedly. Face to face is best.

2.) Plan Design- Make the path of least resistance the one that is best for employees through;

a. Automatic Enrollment- Make the employee “opt out” rather than “opt in”. Make the amount contributed meaningful.

b. Automatic Escalation-This increases the amount contributed over time.

c. Pre-Commitment mechanisms- Employees commit in advance to allocating future raises towards more retirement savings.

d. Match