Smaller Businesses Need An Employee Retirement Program Too

Navigating the vast array of retirement plan options can be challenging for small and mid-sized businesses. In fact, a recent survey by the U.S. Government Accountability Office found that only about 14% of small businesses (fewer than 100 employees) offer retirement plans to employees.

However, smaller companies simply cannot afford to neglect the competitive edge of retirement benefits when hiring and retaining talent. Businesses need a plan provider that is working with them to ensure their plan is as successful as possible.

As HR professionals begin annual benefits reviews I want to share my R.E.T.I.R.E™ framework that summarizes six key considerations when evaluating 401(k) plan providers. It will help to ensure you’re getting the plan that fits the unique needs of your business.

R – Resources to help employees prepare for retirement

It’s important to ensure that employees have access to resources that help them navigate the benefit landscape. Too often, people avoid the topic of retirement altogether because they’re intimated – either by the financial jargon or the sheer breadth of information out there. To help employees find the most suitable plan for their specific needs, plan providers should offer personalized help in the form of enrollment meetings and better yet 1-on-1 sessions with employees who need additional attention.

E – Engage employees

One of the greatest advantages of offering retirement plans is the competitive edge it provides when attracting and retaining talent. But the effects of this can only be felt if employees are actively participating in the plans. HR leaders can leverage their knowledge of the company and employees to identify a “retirement evangelist” – an employee who is taking full advantage of retirement resources and can help engage other employees in the process. This person can serve as a trendsetter to demonstrate for colleagues the benefits of taking an active role in planning for retirement.

T – Tracking individuals toward retirement readiness

While making any kind of contribution towards retirement is a critical first step, the reality is that many people aren’t saving nearly enough to replace their income later in life. I recommend contributing 10% of your salary to a retirement account. Tools like gap analysis or retirement calculators are your best friend – they allow users to track towards retirement in a customized way, helping your employees know what they need to be ready for retirement.

I – Investment solutions for different types of investors

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Just as not all healthcare plans are created equal, retirement solutions should be customized to the individual’s unique needs. There is no one-size-fits-all approach to planning for retirement. To help you provide customized options, look for a provider that allows participants to create tailored investment solutions based on their goals, level of interest in investing and budget. For the average employee, a target date fund or managed account solution will likely provide the best option in the long run, but a savvier investor may have different needs or preferences.

R – Removing conflicts of interest

Conflicts of interest are rampant in the small plan space, and a critical issue to address. Make sure that your plan providers are disclosing any potential conflicts, such as the practice of paying sales commissions. That issue can be resolved by charging a flat fee that is simple and transparent.

E – Expenses – keep fees reasonable

It’s critical to select retirement plans with fees that are manageable for employees, both in the short-term and the long-term. What may seem reasonable in one year may not actually be reasonable over a 30-year period and can take quite a chunk out of someone’s retirement savings over time.

Retirement benefits can level the playing field for small businesses that continually compete with large companies. Being able to offer more enticing benefits helps attract and retain top talent since research shows employees increasingly value saving for retirement. However, retirement solutions can only be effective if businesses have plans that fit the unique needs of their employees. These tips provide the framework for ensuring HR decision-makers can effectively evaluate their retirement solutions to ensure they are getting the most from their plans.

Nathan Fisher serves as managing director, 401(k) Solutions. Nathan started his Fisher Investments career as a client operations associate in 2006. During his tenure, Nathan has served in a wide variety of roles — investment counselor, account executive, marketing associate, trader, research analyst, and regional sales support team leader

Immediately prior to leading the new 401(k) Solutions business unit, he served as vice president, annuity conversion where he spearheaded the establishment of the annuity conversion business unit. Prior to joining FI, Nathan was a senior engineer at Qualcomm, Inc. He received a Bachelor of Science degree in Electrical Engineering from the University of California, Davis, and a Master’s of Business Administration from the UCLA Anderson School of Management at University of California, Los Angeles.

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