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Participants in their 60s are poised on the cusp of retirement, where every move can have big consequences. Plan sponsors have a critical opportunity to support late-career workers’ retirement planning efforts by providing relevant tools and communication strategies that help them make more informed choices during these critical years.
As summer is winding down, now is actually a great time for you to do a mid-year check on your organization’s plan design to see how it is performing among your employees. Are they participating in the plan? Are they increasing their contributions every year? One way to adjust your plan design to say “yes” to both of those questions is by “stretching the match.” This is a high-impact, low-cost tool that can boost contribution rates among your organization.
Retirement plans have long subjected employer contributions to vesting schedules, rewarding tenure by increasing the participant’s ownership in those contributions in proportion to their years of service. However, several law firms have recently challenged this long-standing and common practice, arguing that using forfeitures to offset employer contributions is not in the best interests of participants or beneficiaries, as ERISA requires.
A 2023 Vanguard study found that a quarter of participants deferred less than 4% of their income — generally below the threshold to maximize an employer match. While financial constraints play a role for some, psychological factors can also contribute. Understanding these cognitive biases can help explain why workers forfeit free money — and highlight strategies to help.
Over the past couple of years, the so-called “Great Resignation” has led to an unprecedented number of career changes. At the same time, the boom in remote and gig work means that skilled employees have more choices than ever. For that reason, recruiting and retaining talent in today’s climate can be challenging. Offering the right blend of benefits for your target talent pool can give your company a competitive edge. While there’s no single ideal benefits package, there are tactics you can use to find the one that’s best for your organization.
Although the costs of retirement benefits have generally decreased due to fee compression, smaller plans are still at a disadvantage. Smaller plans pay more per participant due to fixed costs, while larger plans benefit from economies of scale even with greater total costs.