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A majority of employers feel a responsibility to support the financial wellness of their employees, but many employers forgo offering retirement plans altogether because they can be cost-intensive and resource heavy. There are ways, however, that employers can support employees along their retirement journey without creating burdensome costs or overextending their team.
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Here are three ways that employers can help employees to navigate the retirement savings crisis and support their future:
1. Introduce — and automate — 401(k) and retirement plans
It shouldn't come as a surprise, but one of the core reasons employees struggle to save for retirement is the lack of accessibility to 401(k)s and other retirement plans.
Businesses understand the importance of offering these plans, but many feel that the cost of implementing them is too high between initial startup, processing and compliance fees, and optional employer match costs. There's also the costs of the team necessary to run the administration of these plans. This is especially daunting for small businesses, and has been the main reason why
But, there are ways that businesses can cut down on the administrative hassles and costs that come with retirement plans.
Companies can tap technology to automate and streamline the administrative processes behind 401(k)s and other retirement savings plans. Instead of spending hours manually entering new employee information for plans, managing employee contributions from payroll, and taking steps to stay compliant, HR teams can have technology take the bulk of this admin work. The integration of technology can also ensure the accuracy of employees' plans and help employers get plans off the ground even faster, offering immediate assistance to employees.
By automating the administrative hassles and removing some of the costs that come with 401(k)s and other retirement plans, these plans become more accessible to companies of all sizes. Small and medium-sized businesses that once struggled to introduce retirement plans can offer plans comparable to those of large enterprise organizations — without the extensive resources. This allows employers to empower their employees to take the first step in saving for their future.
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2. Give employees the tools to take full advantage of their plans
While offering retirement plans is an effective first step by employers, this alone isn't enough to set employees up for retirement success. Employees need to fully understand the ins and outs of the plans offered to them, how they can get involved, and the role these plans play in their financial well-being.
Employers should educate employees on the retirement and benefit programs they offer so they can take full advantage of them, but there's also an opportunity for employers to take this a step further.
Employers can provide employees with additional financial education tools and resources to improve their overall financial wellness and stability. For example, companies can bring in trained financial advisors to speak intermittently to employees and walk through the importance of saving for retirement and why timeliness is key. They can also offer insight into other financial topics such as building an emergency fund, investing 101 and navigating student loans and other debt.
Companies should provide regular touchpoints with employees to explain any changes made to retirement plans (or any other benefit plans) offered, how evolving policies or new laws may impact them and more. Keeping a lane of communication is also important to address any misinformation that employees may get from social media and other unreliable sources.
By educating employees on their retirement options and giving them the tools to maximize their savings and improve their overall financial well-being, employers can help put employees on track for their future.
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3. Go beyond traditional retirement options
While 401k(s) and IRAs are the most well-known retirement options, there are other, new options available to businesses. For example, the recently launched SECURE Act 2.0 enables a more accessible option to employers that have struggled to launch a 401(k) plan before. The SECURE Act 2.0 introduced the "Starter 401(k)" — an employer-sponsored plan that automatically enrolls employees to contribute up to $6,000 per year, tax-free, requires little cost and administrative work by employers and doesn't require employers to contribute.
Beyond offering retirement plans, employers can also support employees by expanding their benefits in other ways, such as through health insurance, wellness perks and commuter reimbursements. Employees may not be saving for retirement, for example, because they're struggling to cover rising health costs. If employers can't help with retirement directly — or want to do more to help employees — jumping in with other benefits is extremely helpful.
When employees aren't focused on covering a myriad of other expenses, such as their bus rides into work, they are more likely to be able to take advantage of retirement savings plans and build a reliable future for themselves.
Retirement savings are only going to become a larger issue with potential threats to social security, the increasing cost of living and more. Employers are in a unique position to help their employees tackle these retirement savings issues head on and set them up for success in the future.
While traditionally a cost-heavy and resource-intensive process, there are ways that employers can offer retirement plans and help employees to prioritize their finances for their futures, without overextending themselves or their budget.
Moving forward, we're going to continue to see more employees prioritize working for companies that are making moves to help employees along their retirement savings journey. The employers that don't will find it difficult to retain top talent.
