7 Ways to Improve Your 401(k) Benefit

The 401(k) is an enormously popular benefit with both workers and employers alike. According to a recent Transamerica survey, 60 percent of workers report that they believe that their employer's 401(k) plan is a "very important" part of their employee compensation, as did a majority (53 percent) of their employers.

When it comes to recruiting and retaining employees in most industries, a robust 401(k) program - or a suitable alternative such as a SIMPLE IRA or 403(b) plan for non-profits - is critical. 74 percent of all employers nationwide offer employees a 401(k) plan - including 72 percent of all companies with at least ten but fewer than 100 employees. (Among larger employers, the percentage offering a 401(k) plan is over 90 percent, also according to the above survey from Transamerica).

But some employers are behind the curve, when it comes to their company retirement benefits. Here are seven ways employers can soup up their 401(k) plans to help compete for scarce talent:

1)  Offer a Roth option. This benefit allows employees to contribute to the 401(k) on an after tax basis, but all growth within the account from that point is generally tax free - with no required minimum distributions to worry about under current law. This is usually a much better deal for younger, more upwardly mobile workers whose income is likely to be much greater in future years than it is today.

2)  Include your part-time workers in the plan. After all, if it's a valuable and appreciated benefit for your full-time work force, why would your part-timers feel any differently? If it's worth doing for one, it's worth doing for all. Work with your employee benefits specialist on how to structure this benefit so that it is effective and sustainable for you.

3)  Provide incentives to boost contributions by matching. For example, you could match 100 percent of the first three percent of salary deferrals, 50 percent of the first 6 percent of compensation deferred, or you could match 25 percent of up to 12 percent of deferrals. Which one would provide employees with the greatest incentive to save?

4)  Reach out to older employees. Are your employees routinely increasing their contributions when they turn age 50 and therefore eligible for catch-up contributions? If not, you may want to speak with them and ensure they know they are eligible for an even greater salary deferral compensation.

5)  Set up an 'opt out' plan rather than an opt-in plan. That is, have employees enroll in your 401(k) plan automatically, rather than put the onus on them to make a positive effort to enroll. Most workers like seeing their account balances grow with a bunch of employee contributions. After a few pay cycles, chances are good they'll be hooked when they see their statements.

6)  Sell the plan. There's nothing so good it doesn't have to be sold. Speak with your employees and let them know the tremendous benefits of years of tax-advantaged compounding within a retirement plan. Let them know there are wealth/asset protection benefits to 401(k) plans, too: Unlike non-retirement investments, 401(k) assets cannot be seized in a bankruptcy proceeding if the participant is sued.

7)  Keep the number of choices manageable. 12 to 15 different fund choices are sufficient to give participants plenty of opportunities to diversify, while not overwhelming them. Have some safe money options such as a guaranteed investment contract (GIC), some aggressive options, some options for bond funds or other income vehicles, a broad domestic stock funds, a small cap option, an international option, an emerging market option a REIT option and an annuity.

For more information, feel free to Contact Neptune Financial to schedule an appointment. Basic Understanding This blog is being provided for informational or educational purposes only. It does not take into an investment objectives or financial situation of any individual, family, prospect, client, or prospective clients. The information is not written or intended as investment advice and is not a recommendation about managing or investing your retirement savings. An individual seeking information regarding their investment or retirement needs should contact a financial professional. Neptune Financial, and their financial professionals do not render tax and legal advice. Please consult your tax and legal advisors regarding your personal tax or legal concerns.