For anyone who works in the field of hiring, training, mentoring, paying, or generally dealing with employees, you know it can be a real challenge figuring out how to motivate, train, and retain them for the long haul. The benefit package that you offer to your people can go a long way in cementing a lasting relationship. The catch is that the value of certain benefits can be weighted differently depending on the age, experience, and tenure of the employee. The same benefit packages may not have equal appeal to a 27 year old single male that they have to a 40 year old mother of 3 or to a 64 year old that is on the verge of retirement.
To start, your company can simply analyze your employee demographics to determine which generation makes up the biggest segment of your workforce. From there you may be able to use the data provided by your plan’s recordkeeper to determine which of the age bands is utilizing the plan to their greatest advantage. By looking at participation numbers and deferral percentages, your discussion may be centered on what to do with your new found knowledge. There are generally two schools of thought surrounding impacting participant behavior: enforcing or encouraging.
Enforcing behavior typically involves making changes to the plan design to either entice or require your employees to participate in the plan. Enticing could involve making the match richer or relaxing enrollment requirements. Requiring usually means adding an automatic enrollment feature that either makes all newly hired employees enroll in the plan at their eligibility date or enrolls all nonparticipating employees into the plan as of a designated date. It is also important to be mindful of what deferral percentage you select for the automatic enrollment; traditionally, 3% deferral has been used, but there is growing sentiment that 6% can be more appropriate and equally as well received.
If the enforcement route does not appeal to your company, then I would urge you to consider encouraging your people to use the plan through employee education. I must warn you, however, that encouraging can take more work and is more time consuming than the enforcing methods described above; however, the results can be more meaningful. The first step to developing a successful encouraging education program is to recognize the demographic make-up of your company and then to use that information to tailor your education plan. We have found that a one-message-fits-all method of delivering financial education is ineffective because the message ends up being watered down for everyone. Instead we recommend segmenting your employees into their life stage groups and presenting financial information that is meaningful to them. For your employees who are nearing retirement, a discussion about Social Security and successfully transitioning into a retirement lifestyle is significant. For the Gen X’ers, the focus might be on caring for aging parents and adult children all while continuing to prepare for retirement. For Millennials, a discussion about financial freedom and work-life balance may resonate.
The key to either enforcing or encouraging is knowing your workforce and what will work best for them and you as the plan sponsor. For help uncovering what makes sense for both, please contact me at firstname.lastname@example.org
Jamie Kertis, AIF®, QKA
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162