Fall/Winter 2018-2019 | BWD 11
While there are many methods to help your employees prepare for retirement,
consider contributions, offering tax savings and educating employees.
CONTRIBUTE
If your company can afford to, offer 401(k) matching to your
employees. This encourages employee participation and shows them
that you’re invested in their retirement. Common structures include
employer matching contributions, often based on a percentage of
the employee’s salary or deferral, or a specific amount to contribute
to each employee. Employers are encouraged to explore and utilize
intelligent plan design features, such as auto enrollment and auto
escalation, to further enhance the retirement plan benefit. Auto
enrollment automatically enrolls employees in the plan (once
eligibility is met) at a contribution amount specified by the plan
document. Auto escalation allows the employee to automatically
have their contribution increased annually, until they reach their
contribution rate goal.
OFFER HSA ACCOUNTS
One of the best things your employees can participate in to add to
their retirement strategy is through contributions to their Health
Savings Account (HSA). This applies to employees enrolled in a
high deductible health plan (HDHP). The HSA savings account was
created to cover medical expenses either now or in the future. Both
employees and employers may contribute up to an annual maximum,
which is indexed annually via inflation. Research conducted by the
Employee Benefit Research Institute found that some couples may
need $370,000 for medical expenses during retirement. Yet, only a
small fraction of the population has prepared and saved money. HSAs
allow individuals to save money for the unexpected.
While this is a big benefit, many people don’t understand how
powerful HSA accounts can be when leveraged correctly. HSA
accounts can potentially provide the benefits of a Traditional
IRA and Roth IRA account because employees are able to
contribute pre-tax dollars, while having the ability to take
advantage of tax-free growth and distributions. They can be
thought of as an emergency stash for your employees’ medical
fund as well as a great investing tool.
EDUCATE EMPLOYEES
There are many ways to educate employees about retirement.
You can host a lunch and learn where employees can chat
with the human resources department or the appropriate
representatives about general retirement planning. Structured
activities can also be developed, including guest speakers,
webinars, and staff meetings focused on retirement.
Some employees may not have the time or resources to speak
with a financial advisor. Bringing in an expert who specializes
in employee retirement to cover topics that interest your team is
very beneficial. Ideally, the expert will hold brief, individualized
meetings with employees to discuss their goals and objectives.
Seminars and workshops can be helpful, with content that is
relevant to the ages and knowledge of your workers.
These three methods are contributors to an employee’s
retirement readiness and their ability to enjoy the next phase of
their journey.