The Best Retirement Plans Are Those Your Employees Will Actually Use
Your organization's employees may be missing out on retirement plan benefits. Here are ways you can help them achieve their goals.
Your organization may offer a defined benefit plan such as a 401(k) or 403(b), seriously champion contributions to Roth or traditional IRAs, or feature other retirement plan options. But they won't be effective unless your employees understand and use them. If your employees don't know what these benefits are and how they work, it's possible they may not take full advantage of these great benefits.
The best retirement plans are those that employees actually use. So, how can you help facilitate that?
Know the High Cost of Health Care in Retirement
According to the ADP white paper, Challenge for Americans: Saving for Health Care Costs in Retirement, a 65-year old couple in good health should expect to pay approximately $321,000 in health care premiums alone during their retirement. Since health care costs are expected to rise at twice the rate of social security's cost of living adjustments, the gap between retirees' fixed income and out-of-pocket health care expenses is expected to widen significantly over time.
It's not surprising that rising health care costs is one of the top three retirement-related concerns employees have, behind running out of money and having health issues.
Encourage Employees to Use HSAs, Where Applicable
Employees who have access to retirement plans and other retirement or related benefits through their employers are much more likely to have retirement savings. Although many look down upon high deductible health care plans sometimes, those firms that offer these can help staff lessen their concerns regarding health care in retirement through the health savings accounts (HSAs) that accompany such plans.
HSAs allow employees to save to cover their out-of-pocket medical expenses. Unlike their better known counterparts, flexible spending accounts, employees can port their HSAs from employer to employer and roll the balances over from year to year. There is no "use it or lose it" provision. In retirement, any balance in the HSA can be used to pay Medicare parts A, B, and D costs, plus other eligible health expenses.
Encourage Participation in Financial Wellness Programs
The best retirement plans sometimes aren't actually retirement plans, but financial wellness programs that promote general financial fitness and planning. According to the ADP retirement white paper, such programs help personnel build a strong core of financial skills that serve them in many areas of their financial lives. They can help employees prepare for retirement, pay off debt, manage their spending and save to achieve major goals.
According to Entrepreneur, financial stress leads to more work conflicts, higher absenteeism, greater distraction levels and more health issues. The benefit for organizations to implement programs that address this include increased employee productivity, greater engagement and lower health costs.
Use Technology to Provide Personalized Data and Publicize all Offerings
If workers don't know that options exist, they obviously won't use them. Firms should publicize the available options and do so outside of any enrollment periods. Otherwise, retirement and related plan nuances and extras can be lost in the effort to simply select the best overall health care benefit.
Financial leaders should work with human resources personnel to develop and provide FAQs gleaned from past experience with the benefits, then post this information on company intranet or email it out periodically. Firms can also provide comparisons or online tools, akin to that provided for health insurance plans, to help personnel determine which alternatives or combinations of options will best fit their needs.
To really encourage employees to ramp up their savings and increase their participation in existing plans and programs, firms need to make a compelling case. According to Entrepreneur, financial leaders can leverage technology and use an employee's personal data to create a financial profile or assessment of each employee. Certain programs can then match the assessment to available programs and provide recommended actions for the employee, such as increasing their 401(k) contribution or speaking to a debt counselor through an Employee Assistance Program.
Showing employees in print (or online) how they could be doing better financially often serves as a great motivator to finally take action. Organizations can then send annual reviews or re-assessments, which will allow employees to track their progress and help keep them on the path to goal achievement.
Finally, user-friendly online portals are often useful in getting people more involved with their benefits. Self-care portals are also often a great way for employees to easily get answers to their questions. Such portals can also reduce the burden on HR.
In order for any company-sponsored plan or benefit to be useful, it must first be used. Making employees aware of the issues and providing information periodically in easy to follow formats upfront are crucial. To promote more usage, using technology in the form of portals and personalized assessments with matching can work very well. Thus, financial leaders can help deliver the best retirement plans those that are actually used to achieve employee objectives.
