Small employers are having a rough time educating the upsides of 401(k)s to their workforce.
Among benefit options, saving via 401(k) plan certainly has upsides. Problem is, according to a new survey on the issue, smaller employers are having a rough time effectively communicating those upsides to their workforces.
The result? Participation is not what it should be and that’s a definite competitive disadvantage, especially with record-low unemployment rates, according to a report from Nationwide.
Also, when the Bureau of Labor Statistics reports that 71% of all U.S. workers have access to retirement benefits (defined-benefit and defined-contribution plans), it’s a clear reason why offering a 401(k) to employees is necessary to competitively attract and retain talent in today’s strong, steady labor market.
Eric Stevenson, president of Nationwide Retirement Plans, says the company’s latest research, which surveyed 400 U.S. business owners with workforces of 11-500 employees that offer 401(k)s, found business owners strongly agree that 401(k)s offer key benefits, including:
- including attracting and recruiting top talent (88%);
- tax advantages for both one’s business and employees (88%); and
- improved employee retention (86%); and
- being viewed by employees as necessary (84%).
The survey data also found that, although nearly nine in 10 business owners report their retirement-plan provider offers tools and resources to help encourage employees to participate, 53% still struggle with communicating the benefits and encouraging participation among employees. Plus, 68% of business owners acknowledge it’s their responsibility to encourage employees to participate in a 401(k) offering.
“The data illustrates that the industry has an opportunity to help business owners bridge this gap, and make a meaningful difference in the retirement security of their employees,” Stevenson says.
An overwhelming majority of business owners agree 401(k) benefits outweigh challenges. And while 401(k) plans have become a standard of sorts as a retirement benefit, they still report the following challenges in offering a 401(k) to employees:
- financial cost (45%);
- encouraging and managing employee participation (41%);
- administrative headaches, i.e. paperwork for plan administration (37%); and
- lack of knowledge around starting or maintaining a plan (27%).
In addition, Nationwide’s data show nearly two-thirds (64%) of business owners feel it is their responsibility to provide employees details on the benefits of participating in a plan, as well as share information on how to enroll (62%). In order to cut through the jargon and effectively communicate the benefits of participating in a 401(k) with employees, business owners can look to their plan provider and advisor for additional guidance.
A workplace-retirement plan, such as a 401(k), is among the most valuable employment benefits and a top gauge of retirement preparedness, Stevenson notes, adding that, as such, it’s integral that employers feel equipped to effectively have these conversations with employees.
“Talking to a financial advisor is a good first step to not only discuss the resources and benefits available to business owners from plan providers, but to also gain insight into how to thoughtfully distribute this information,” he says.