What is Your Millennial Employee Retention Strategy?

turnoverDoes your company have a millennial retention strategy? The rapidly growing millennial workforce is changing ideas of loyalty and employee retention in the workforce. According to the The Deloitte Millennial Survey 2016, two-thirds of Millennials express a desire to leave their organizations by 2020. Businesses must adjust how they nurture loyalty among Millennials or risk losing a large percentage of their workforces. Since most young professionals choose organizations that share their personal values, it’s not too late for employers to overcome this “loyalty challenge”. Companies that approach employee retention in the same way that they did even five years ago may lose their most valuable young talent; as our Employee Education Specialist, Caleb Bagwell wrote about just last week, the cost of replacing employees is high.

Here are 4 job drivers to implement into your company’s culture to influence Millennials in the workplace and how you can translate those concepts into effective employee retention programs.

Recognizing Generational Differences

Generational differences in the workplace has become a HR hot topic and for good reason.   More than one-in-three American workers today are Millennials (adults ages 18 to 34 in 2015), and this year they surpassed Generation X to become the largest share of the American workforce, according to 2015 Pew Research Center analysis of U.S. Census Bureau data. It is likely that experienced baby boomers approaching retirement may have different benefit and lifestyle priorities than your new millennial. While compensation and the quality of the work experience remain important across segments, failing to understand that different generations may have different expectations and preferences can lead to challenges at all levels of the organization. With the youngest baby boomer being age 52, doing the math lets you know that in 10 years, your company is going to look a lot different than it does today.   Utilizing a workforce leadership and education consultant to bridge the communication gap is integral to growing a sustained, experienced new group of employees.

Benefits and Compensation

gen diffMillennials are bringing to the table a new set of benefit expectations for you to examine; therefore, it can be easy to lose sight of traditional compensation and benefits. However, these areas still give employers an edge in recruiting and retention. One study discussed by SHRM found that 62 percent of Millennials would leave their jobs for better family benefits. The same study found that 41 percent indicated that a lack of family-friendly support had negatively impacted their work experience. As a result, it’s useful for companies to evaluate what their competitors are offering their employees. Are compensation and benefits on par with industry best practices or averages? Millennials need to feel valued and do not need any extra incentive to look for a job with your competitor. It is a good business practice for all generations of your employees to make sure their compensation and benefits are in line with industry standards.

Flexibility

The continued rise of trends like telecommuting, flexible scheduling, freelancing, and job sharing has shaped Millennials’ expectations of the workplace. As they advance in their careers, they’re more likely to be concerned about work-life balance, whether it’s in response to family demands, health, or outside interests. Companies that provide some level of flexibility are often able to hire more millennial talent by taking steps such as experimenting with unlimited vacation time and implementing structured telecommuting policies. While there are a wide variety of benefits around the idea of work-life balance, it’s important to be realistic about what works for your company, workflows, and culture. However, in general, the more you’re able to provide your workers with flexible benefits, the easier it may be to retain millennial employees.

Collaboration and Learning

shutterstock_126190568.jpgCollaboration and feedback are critical to keeping Millennials satisfied at work. Businesses are faced with how to make that crucial communication a reality. Finding ongoing ways to support learning and collaboration, from formal mentorship programs to investing in training programs, may also help increase retention. Today’s younger workers have a strong desire to contribute, but also want work-life balance, flexibility, and collaborative environments. By recognizing what energizes Millennials at work, it may be easier to create more effective employee retention programs.

Jamie Kertis, AIF®, QKAjamie kertis headshot
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162
www.grinkmeyerleonard.com

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What the “F” ? – Part 2 – Fees

wtfpt2A four part series that will address important themes of plan management

 

Last installment we tackled the first 4 letter “F”, fund as in mutual funds. This entry will examine the next 4 letter “F” – Fees. Fees and funds go hand and hand as every dollar that you pay in fees lessen the dollars available for retirement. However, I must disclose that I do not believe that cheapest is best and to date, there are not any federal regulations that state your plan has to be the cheapest. What the regulations do state is that as a fiduciary to your company’s retirement plan you have a duty to understand and monitor the fees associated with operating the plan.

The first fee to consider when analyzing the overall cost of your plan is the mutual fund expense ratios. On http://www.morningstar.com an expense ratio is defined as the annual fee that all funds or ETFs charge their shareholders. It expresses the percentage of assets deducted each fiscal year for fund expenses, including 12b-1, management fees, operating costs, and all other asset-based costs incurred by the fund. Let’s breakdown each component by first looking at the 12b-1 fee. A 12b-1 fee is earmarked for the financial professional’s compensation and can range from 0.25% up to 1.00%. It should be noted that not all mutual funds have a 12b-1 fee. If you work with a financial professional that is fee-based or fee for service, then that adviser may select funds that do not pay a 12b-1 fee since he or she does not rely on that fee for compensation. The information on how much each fund in your plan pays in 12b-1s should be accessible through the fund prospectus. Next management fees and operating costs are the portion of the expense ratio that is used to compensate the mutual fund manager for his or her expertise in running the fund and for any costs the mutual fund company incurs in managing the fund (producing prospectuses, mailing costs, building costs, etc). This is typically the largest portion of the overall cost of the fund and is usually higher in actively managed funds than in passively managed funds. Finally there is the mysterious “all other” portion. In the retirement space the “all other” can be especially important since many times this is referring to the recordkeeping service fees (RSFs) or subtransfer agents fees (subTA) that are paid to the recordkeeper of your 401(k) plan. In general both the RSF and subTA fees are paid by the mutual fund to the recordkeeper for keeping all the individual records of its investors; in the retirement plan space that means all of your participant’s records on their individual investments. The tricky thing about these fees in particular is that they are negotiated between each recordkeeper and each mutual fund; therefore they are not consistent or readily disclosed. For example, ABC mutual fund may pay DEF recordkeeper 0.15% in an subTA fee, but ABC fund might also pay GHI recordkeeper 0.10% in a subTA. While the RSF or subTA fee may not be the largest portion of the overall expense ratio, it can be very important to understand the next aspect of your overall retirement cost and that is the cost associated with your recordkeeper and third party administrator (TPA).

In February 2012, the Department of Labor issued its final regulations on plan level fee disclosure under section 408(b)(2); now simply known as the 408(b)(2) disclosure. The very simplistic explanation over the 408(b)(2) regulation is that it was designed to disclosed to the plan sponsor the cost of doing business with covered service providers (CSPs) including recordkeepers and TPAs. While it did help to uncover some hard dollar fees and the formulas for calculating compensation, it is still fairly difficult in some cases to truly understand what you are paying to whom. If you work in a bundled arrangement, where the same provider serves as your recordkeeper and TPA, then chances are that the subTAs or RSFs that they are receiving from the mutual funds may cover all costs associated with administering the plan; resulting in a $0 hard dollar billable to you the plan sponsor. These plans are sometimes sold as “free” because there is not a hard dollar cost; however, you know now know that the plan is not in fact “free” but rather that the cost is being subsidized by the money received from the mutual funds. If you are working in an unbundled arrangement where there is a separate firm providing recordkeeping services and another providing TPA services, then you may experience a bill from your TPA and “free” services from the recordkeeper. Again, note that the recordkeeper may be receiving money from the mutual funds to cover their costs. Also, in many cases the recordkeeper may be sharing revenue with the TPA in order to help lessen their billed fees to you. If as a plan you are currently receiving any billable expenses that you pay from the company or pass on to your participants to pay, then chances are the mutual funds in your plan have no or low subTAs or RSFs that do not cover the entire cost to run the plan.

The final cost to understand is what you are paying your financial representative. He or she may receive the 12b1 from the mutual fund if you are not in a fee based arrangement. Please note that if compensated by a 12b-1 fee, then his/her compensation is determined by the share class of mutual fund in your plan. In general an A Share fund pays 0.25% and an R share pays 0.50% (there are other share classes, but these are the most common in retirement plans). If you are in a fee based arrangement with your representative, than he/she may charge a flat hard dollar fee or an asset based charge (0.25% of plan assets). There is not a right or wrong way to compensator your financial professional for their time, but like all of the other fees that we have discussed it is just important that you understand how they get paid.

One of my favorite business quotes is “Cost is only an issue in the absence of value.” and this is especially true as it pertains to your company’s 401(k) plan. As I said in the outset, you don’t necessarily have to have the cheapest plan, but you do have to be able to demonstrate that you understand what you are paying and what you are getting for those dollars. If you are unsure of what you are paying any of your vendors or if those costs are reasonable, then please contact me. We are happy to help you answer this “What the “F”?”!

 

Investments are subject to risk, including the loss of principal. Because investment return and principal value fluctuate, shares may be worth more or less than their original value. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Past performance is no guarantee of future results. Talk to your financial advisor before making any investing decisions.

 

Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the mutual fund, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

jamie kertis headshotJamie 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
www.grinkmeyerleonard.com

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Calling All COIs

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Poll most business owners, presidents of companies, or C-level executives about who are there most trusted advisors are and chances are you will get the same answers: their spouse, their attorney, and their CPA.

As a CPA, who are your most trusted advisors?  Do you have an attorney or other professional who you can turn to for ideas or advice to help you expand your knowledge base and bring new ideas to your clients?

Argument for an Attorney

When determining which attorney to work with as a center of influence, first take a look at your own practice and where your clients may have a specific need.  If you work with a large number of business owners, there may be a need for an attorney that has a strong working knowledge of buy-sell agreements, estate planning, or liability.  Additionally, if you are a CPA who deals with business clients and their qualified retirement plans, there is a good chance that you will come across a situation that will require an outside opinion, sometimes even a legal opinion, on the operation of the qualified plan.  I would argue that it makes more sense to have already vetted and established an relationship with a legal professional before the situation arises that you need to recommend one.  Attorneys also can provide you with insights and opinions that can help you guide your clients away from trouble to begin with.

Argument for a Financial Advisor

Similarly when deciding which advisor to partner with as a center of influence, first take a look at your practice to determine if it would make more sense to partner with a professional that specializes in personal wealth management or qualified plan management.  If you find that most of your practice is focused on personal returns and individual tax preparation, then it would make more sense for you to team up with an advisor that also focuses on that form of client service.  On the other hand, if your practice is focused on qualified plan audits and business tax preparation, then working with an advisor who also works on qualified plans is the best way to go.  The pool of advisors that focuses on qualified plans, such as 401k plans, is much smaller, but our knowledge base of the challenges that our 401(k) clients face can be very valuable.  For instance, a qualified plan advisor is integral in changing plan service providers.  Although a service provider change may not seemingly have an impact on your ability to conduct an audit, it certainly can when you consider the reports that you need to complete your audit and the vast differences when it comes to the availability of reports on a provider website.  If you have a relationship with that advisor prior to the conversion taking place, you will have a better chance to give your opinion on the new provider that is chosen.

Cultivate the Relationship

In both cases, attorney and advisor, these professionals are more than likely looking to add value to their clients and you as a CPA have an excellent opportunity to do just that.  Perhaps you could consider hosting joint lunch and learns, seminars, or webinars that offer content to clients from your unique perspective as a CPA.  For example, I recently learned there is a significant difference between a limited scope and full scope audit offered to plans with over 100 employees; I would not have gained this useful information had it not been for my relationship with a trusted CPA partner.  Vice versa, I was able to inform this CPA group about the short-comings that we have seen in plan audits and what are clients felt were the most overlooked items in their audits.  In both cases, we were able to add value to our own practices while gaining information that we can pass along to our respective clients.

jamie kertis headshotJamie 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
www.grinkmeyerleonard.com

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PPA Document Restatement Deadline Looming

ppa.jpgEvery six years, the IRS requires that employers using a pre-approved prototype or volume-submitter 401(k) document restate their plan document to incorporate any and all changes made to the regulations and tax laws that impact retirement plans. This go-around is labeled the Pension Protection Act of 2006 (PPA) restatement process and will pick up the changes made by the Pension Protection Act of 2006, the final 415 regulations, the Heroes Earnings Assistance and Relief Act (HEART) of 2008 and the Worker, Retiree and Employer Recovery Act (WRERA) of 2008. The window for restating your plan document opened on May 1, 2014 and will close April 30, 2016 which means if this is the first time that you are hearing about this restatement phase it is of the utmost importance that you contact your third party administrator (TPA) as soon as possible to get your restatement started.

Do I Have To?

The long and the short of it is “Yes”! Your retirement plan must follow the written plan document and the written plan document must follow the rule, regulations, and guidelines set forth by the IRS and the Department of Labor (DOL). Therefore, when one of these governing bodies makes changes to the rules, your plan must adopt to follow these rules. Most of the time, these changes can be handled through an interim or “snap-on” amendment to the plan, but when the number or the complexity of the changes gets to be too great, a restatement is required.

Who Should be Helping Me?

Your plan’s third party administrator (TPA) is more than likely the party that will be assisting you with the restatement of your document. Keep in mind that it is common for your TPA and your record keeper to be the same company, but that is not always the case. It is also important to determine if your plan is using a prototype or volume submitter document or if your plan is an individually drafted or designed plan. In most cases, your plan will be either a prototype or volume submitter, but it is definitely important to make sure you are clear on what type of plan you have as that will impact when and how your plan has to be restated.

Anything Else I Should Know?

Now could be a good time to review your plan to determine if any changes should be made to the plan provisions that are not specifically covered by the required restatement. For example, your plan could review the definition of compensation, Roth options, and/or automatic enrollment procedures and make updates to these or other provisions during the mandatory restatement. Just be ware not to change any “protected benefits” such as the timing or forms of distributions during the process.

By this time, hopefully your provider has already completed the restatement process or at least you plan’s TPA has reached out to you to discuss the restatement process; however, if not, it is time to make a call to your plan provider to get the process started! If you have any questions about the restatement process, what it means to your plan, or where to go for assistance, please let me know by calling 205-970-9088 or emailing me at jamie@grinkmeyerleonard.com.

Jamie Kertis, AIF®, QKAjamie kertis headshot
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162
www.grinkmeyerleonard.com

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IRS: Skip Optional Compliance Questions on the 5500, 5500-SF for 2015

IRS: Skip Optional Compliance Questions on the 5500, 5500-SF for 2015

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For 2015, plan sponsors should skip the compliance questions that were just added to the Forms 5500 and 5500-SF, and to Schedules H, I and R for the 2015 plan year. Revised versions of the 2015 instructions for both forms contain the new information regarding the optional questions.

The Department of Labor (DOL) announced this change in a Feb. 16 message to software developers for EFAST-2, the electronic system by which Forms 5500 are submitted. While the DOL has not yet posted these revised versions on the website of the DOL’s Employee Benefits Security Administration (EBSA), the agency says that it plans to do so.

The revised instructions read as follows:

Form 5500

IRS Compliance Questions. New Lines 4o, 4p 6c, and 6d were added to Schedules H and I. The IRS has decided not to require plan sponsors to complete these questions for the 2015 plan year and plan sponsors should skip these questions when completing the form.

New Part VII (IRS Compliance Questions) was added to Schedule R for purposes of satisfying the reporting requirements of section 6058 of the Code. The IRS has decided not to require plan sponsors to complete these questions for the 2015 plan year and plan sponsors should skip these questions when completing the form.

Form 5500-SF

IRS Compliance Questions. New Lines 10j, 14c, 14d, and new Part IX (IRS Compliance Questions) were added to this Form for purposes of satisfying the reporting requirements of section 6058 of the Code. The IRS has decided not to require plan sponsors to complete this question for the 2015 plan year and plan sponsors should skip this question when completing the form.

The IRS added questions to the Form 5500 and its schedules relating solely to IRS compliance issues because the IRS now requires that certain filers submit the Form 5500 Series electronically. It had said that answering the IRS compliance questions it added to the form was optional for the 2015 plan year.

Jamie Kertis, AIF®, QKAjamie kertis headshot
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162
www.grinkmeyerleonard.com

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The Highs and Lows of Auto-Enrolls

checkThere is a fascinating social science study that was conducted by Eric Johnson and Daniel Goldstein that studied the willingness of people across European countries to donate their organs after they pass away (stay with me since I know this seems to have nothing to do with your 401(k) plan). They compared Denmark and Sweden, Austria and Germany, the Netherlands and Belgium and France and the U.K.; the countries were paired based on their similarities in culture, religion, and norms. However, despite the likenesses there were significant discrepancies in their organ donation opt-in rates: Denmark’s opt-in rate was 4.25% while Sweden was at 85.9%, Germany was at 12% while Austria was at 99.98%, the Netherlands was at 27.5% while Belgium was at 98%, and finally the UK was at 17.17% while France was at 99.91%. So what could possibly explain the significant differences in these similar countries? As it turns out, it was a simple difference in the design of the organ donation opt-in process on the form at the D.M.V. In the countries where the form in set as “opt-in”, check a box if you would like to donate, people tended not to check the box and therefore do not become part of the program. The countries where the box on the form read “opt-out”, check if you do not want to participate, people do not check the box and are automatically enrolled in the program. The conclusion of the study was not that people do not care about whether or not their organs are donated postmortem, but rather how small changes in our environment, “opt-in” versus “opt-out” can shape our decisions.

Which brings us to the discussion of automatic enrollment in a 401(k) plan and the subsequent effects on your plan – the highs and the lows. While the concept of automatic enrollment, or negative election, has been in place since the mid-1990s, the Pension Protection Act of 2006 encouraged and therefore accelerated the use of automatic enrollment provisions within 401(k) plans by removing some of the regulatory requirements. Furthermore, the IRS eased some of the restrictiveness of correction methods for automatic enrollment in Rev. Proc. 2015 – 28 (https://www.irs.gov/pub/irs-drop/rp-15-28.pdf). With the groundwork laid for the use of automatic enrollment, let’s examine the pros and cons to adding this plan design feature.

High – Increased Participation
The most obvious high of adding automatic enrollment to your 401(k) plan is an increase in participation. When making the decision to amend your plan to add the provision, there are two choices; make automatic enrollment effective for all eligible employees or just for those who become eligible after the provision is put in place. If you elect to enroll all eligible employees, there’s a better chance that you will see a dramatic impact in participation numbers. We work with a lumber company that opted to make the automatic enrollment provision effective for all eligible employees and their participation rate doubled virtually overnight. With greater participation, the plan may be more likely to pass annual compliance testing and will have an employee population that may be better prepared to retire.

Low – Stagnant Deferral Rates
The fear with adding automatic enrollment without auto-escalation, increasing deferral percentages on a set schedule until a certain level is reached, is that participants will get enrolled in the plan at the designated deferred percentage, typically 3%, and then never give another thought to increasing their deferral percentage. While 3% is certainly better than 0%, 3% will more than likely not get your participants to their retirement goals. In order to combat stagnant deferrals, a regular and meaningful education program should be put into place along with utilizing GAP analysis tools that can illustrate what your participant’s current deferral amount will equate to in retirement income.

High- Flexibility within the Automatic Enrollment Provisions
The number one reason that we hear as to why a company is hesitant to add an automatic enrollment provision is that they are afraid their employees will be frustrated that their money was contributed without their consent and now it is locked into a plan they don’t want to participate in. The easiest way to avoid this situation is by selecting the correct automatic enrollment arrangement. There are three types: basic automatic enrollment 401(k) plan, eligible automatic contributions arrangement (EACA) and qualified automatic contribution arrangement (QACA). The basic feature is what most employers understand automatic enrollment to be, a stated percentage of eligible employee’s wages will be automatically deducted from each paycheck unless the employee elects to not participate. The EACA allows automatically enrolled participants to withdraw their contributions with 30 to 90 days of the first contribution without penalty (standard tax rates apply); thereby solving the concern that participants may be unable to access their money.   Finally, the QACA plan design allows the plan to automatically pass certain annual compliance tests and must include features such as a fixed schedule of automatic employee contributions, employer contributions, a special vesting schedule, and specific notice requirements.

Low – Increased Plan Costs
There is a pretty good chance that as your plan adds participants and assets, the costs will rise in potentially a few ways. First, if your company offers a match, then the more participants there are contributing to the plan, the more the company will owe in company match. Second, depending on your contract with your 401(k) plan providers, more participants could mean higher cost if there is a per head fee and/or greater assets could lead to a higher dollar amount if the fees are based on plan assets. When your plan opts to add automatic enrollment, the plan should also consider renegotiating provider fees in order to make sure that the change in participation and assets will not negatively impact the appropriateness of the fees.

As with any plan provision, it is important that the plan committee closely examine all of the highs and lows of amending the 401(k) plan. Please let me know if I can be of any assistance in assessing whether adding automatic enrollment would be appropriate for you plan.

Jamie Kertis, AIF®, QKAjamie kertis headshot
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162
www.grinkmeyerleonard.com

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Take Care of Your Employees

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Take care of your employees.

Jamie Kertis, AIF®, QKAjamie kertis headshot
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162
www.grinkmeyerleonard.com

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On Shaky Ground

shutterstock_305483711The stock market of 2016 seems to have picked up right where it left off in 2015 on shaky ground with dramatic downswings and nagging uncertainty. Admittedly, we all had become a little spoiled by the last bull market which started in March of 2009 and persisted until the third quarter of 2015 and we have been thrown back into the harsh reality that even though the S & P 500 has had an overall upward movement since it was introduced in 1923 there has been and more than likely always will be an element of volatility. As a matter of fact, when you take a look at the history of the stock market from 1928 to 2013 you will find that a decline of at least 10% occurs on average every 11 months and a decline of 20% happens about every 4 years.  So the question is what can you as a plan sponsor do to help ease some of queasiness caused by these ups and downs.

Process, Procedures and Prudence

As I have discussed in previous blogs, I believe the number one thing that plan sponsors can and should do to protect themselves and the plan against market volatility and investment performance is to have a documented process with written procedures that demonstrate prudence in selection and monitoring in place. You can argue until your blue in the face about the best investment in each asset class, but when it comes down to it performance takes a backseat to process. Now more than ever, it can be important to review the plan’s Investment Policy Statement (IPS) and to review the committee that is place to execute that IPS.   There are also notices such as the 404(c) notice and the 404(a)(5) notice that you can send out to your participants that describe the participant’s right to direct their own investments and to gather information regarding those investments.

Monitoring

While sometimes the best investment strategy within a 401(k) plan for a participant can be “set it and forget it”, the same is not true for the investment committee and the monitoring of the investments within the 401(k) plan. Once the committee has decided on an appropriate investment menu for the plan, the committee must also monitor those investments for continued appropriateness. A word of caution here, many recordkeepers and investment providers have tools that can help the committee monitor performance, but they may or may not consider other factors such as the demographic make-up of the participants, the overall risk tolerance of the plan, the cost of the investments and/or the availability of alternative investments.

Dollar Cost Averaging

Google “time in the market versus timing the market” and you will find countless articles that preach the value of a buy and hold strategy and that bemoan the fact that most average investors buy high and sell low. This concept of buy and hold, while not appropriate for every investor, is of particular interest in 401(k) plans because of the power of dollar cost averaging. Dollar cost averaging is the practice of investing a regular amount of money regardless of the performance of the market and therefore, the average cost of investments has the chance to decrease while your chance of greater returns increases.

The beauty of consistent contributions into a 401(k) plan is that a participant can participate in dollar cost averaging without even realizing it! A note about dollar cost averaging, dollar-cost averaging is not a foolproof investment technique. It does not assure a profit or protect against loss in declining markets. It involves continuous investment in variably priced units, regardless of price fluctuations. Investors contemplating the use of dollar-cost averaging should consider their ability to continue purchases over a period of time even when prices are low.

Education

Knowledge is power which leads to confidence and calm; this is very evident in 401(k) plans when it comes to the comfort of the average participant in investing his or her hard earned money in an investment that they have little to no control over. When we conduct employee education meetings the first tenant that we attempt to convey is that of risk tolerance. We believe that if a participant understands and is comfortable and confident in the amount of risk that he or she is taking, then that participant is less likely to stop investing in times of market volatility. Additionally, we find too often participants do not have a realistic expectation of investment performance due to a lack of education about the investments in their plan which leads to confusion and frustration and ultimately a decline in participation. We take the time to educate our participants about the level of risk and the potential return that they may receive for taking on that risk.

While the recent markets have caused even the most seasoned investor to reach for aspirin, there are steps that you can take as a plan sponsor to insulate yourself, your plan and its participants from the headaches of volatility. If you need further guidance or have questions about the current market condition, I would love to hear from you. Please contact me at 205-970-9088 or jamie@grinkmeyerleonard.com.

Disclosure:  Certain sections of this commentary contact forward-looking statements that are based on our own reasonable expectations, estimates, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and investors cannot actually invest directly into an index. Unlike investments, indices do not incur management fees, charges or expenses. Past performance is not indicative of future results.

401(k) Year-End Tips

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As the end of the year  is quickly approaching, here are some ideas that you can share with your plan sponsors of items that they should be aware of.

  • Annual notices are due at least 30 days before the plan year end.  These include Safe Harbor, QDIA, 404(c), and automatic enrollment notices
  • Add a Safe Harbor provision.  If the plan annually fails compliance testing, then a Safe Harbor plan design could be a good option.
  • Research alternative plan designs for possible tax deferral including non-qualified deferred compensation plans and cash balance plans.
  • Review the plan design for possible changes including adding a Roth option or amending your plan’s cash out provisions.
  • Make sure all Required Minimum Distributions have been processed.

– Jamie Kertis, AIF®, QKA / Retirement Plan Specialist

Jamie Kertis, AIF®, QKAjamie kertis headshot
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162
www.grinkmeyerleonard.com

Contact Jamie

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Three Ways to Make Employees More Productive With Your Retirement Plan – {Anatomy of a Happy Office}

shutterstock_249108538 copyA quality retirement plan is a carrot that encourages loyalty and productivity. We talk about plans that “recruit, reward and retain” employees, but you should also consider the importance of helping an employee “retire.” The trend of baby boomers planning to stay employed to a latter age is well-documented. Although this can be beneficial, it can also mean increased costs for your company:

  •  Wages are likely on the high side of the scale for comparable positions
  •  New talent is not being developed, or is leaving for greener pastures

If you can offer an effective exit plan for the baby boomer, you help your employee and your company.  The seasoned employee is motivated to be productive, but also sees a light at the end of the employment tunnel.

A competitive retirement plan motivates younger employees as well. They see an opportunity to grow wealth within the company rather than seeking their fortune elsewhere. The golden handcuff of a long-term savings plan may give them a reason to avoid the salary chase.

An effective approach

This is an excellent environment to review and update your business’s retirement plan. While many business planning considerations may be on hold due to capital restrictions, productivity of the current workforce is paramount.  And retirement is on workers’ minds … young and old.

Cost should not be the controlling factor in reviewing the company’s plan. Effectiveness should be the target.   Keep these keys to effectiveness in mind and you’ll have a happier, more productive workforce:

1. Make it about them:  I’ve seen some retirement plan communications that read more like playbooks than explanations. While it is important that employees understand the “how” of the plan, you first have to sell the “why.”  Think of it this way: you invest dollars to set up a retirement plan, but a few cents spent in effectively communicating the plan can significantly enhance the return on your investment.

2. Offer options:   Automatic enrollment, pre-tax and post-tax features, expanded investment options – all of these give the employee an enhanced feeling of control. In an environment where so much of their retirement capital is associated with your company plan, peace of mind comes with giving the employees an enhanced say in how their money is handled.

3. Promote the hidden paycheck:  Now that you have the employee’s attention, use the company retirement plan to promote the other benefits of employment with your company.  With communication about the retirement plan, you can also change the conversation from “wages” to “pay plus.”  You can promote the company’s contribution to Social Security, the medical plan, flex time and other benefits that enhance the employee’s life.

In decades past, workers built retirement savings by paying down the mortgage balance on their home, putting money in savings bonds and building up cash values in their life insurance policies. Although it can be argued that these approaches are admirable, the reality is that not as many Americans are doing this. Instead, a sizeable chunk of a family’s retirement savings sits in their qualified plan at work. 401(k) features, such as automatic enrollment and employer match, make it increasingly easier to build up a retirement nest egg. For higher paid employees, nonqualified plans have become a key savings source, especially in a rising tax environment. The bottom line is employees are far more attentive to what retirement plans are offered through their employers.  When an employee feels like their employer has his or her best interest at heart, they are far more likely to work harder and perform better.   Add in the value of the employee not feeling as stressed about whether they will or will not be able to ever retire, the employees’ morale boost again increases work productivity which helps you the employer while benefitting your employees.

-Jamie Kertis, AIF®, QKA / Retirement Plan Specialist

*excerpts of article from Forbes.com article by Steve Parrish – “Why You Should Care About Your Employees’ Retirement Plans”


anatomy-smallAll through November, all of the advisors at our office are doing a series of articles, tips and tools and geared toward the “Anatomy of a Happy Office”.  Follow all of our blogs to read it all.
Northside of Average by Valerie Leonard
Motivated Monday by Caleb Bagwell
TAG-Living Loud by Trent Grinkmeyer

 

Jamie Kertis, AIF®, QKAjamie kertis headshot
Retirement Plan Specialist
Grinkmeyer Leonard Financial
1950 Stonegate Drive / Suite 275 /Birmingham, AL 35242
Office: 205.970.9088 / Toll-Free: 866.695.5162
www.grinkmeyerleonard.com

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