As we continue to navigate an evolving workforce landscape, it’s becoming increasingly evident that employees at different career stages have distinct needs when it comes to retirement planning and benefits.
Understanding and addressing these diverse needs is crucial to foster employee satisfaction, retention, and overall financial wellness.
To effectively meet these diverse needs, it’s wise for plan sponsors to consider implementing personalized resources and benefits tailored to each career stage. Our Q2 newsletter discusses tailored strategies for each career stage.
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
Employees late in their careers need information that helps smooth the transition into retirement
We are entering the “Great Retirement” era, where tens of thousands are hitting retirement age daily. By 2030, the entire baby boomer generation will be 65 or older. These hard working and resilient employees were the first to experience the shift from guaranteed pension plans to defined contribution plans. With retirement in sight, near-retirees are a key target audience for financial wellness programs.
Older employees are likely to experience heightened financial stress and anxiety as they transition from work into retirement. The bad news is that financial stress can have a corrosive effect in the workplace. The good news is that near-retirees are likely to be open to, and may actively seek, information that helps transform retirement uncertainty into retirement confidence.
The information can be delivered in a variety of ways, including through education programs and communications strategies. Having a professional offer individual financial advice or coaching can make it easier for employees to apply what they’ve learned. As you consider how best to convey the value of your workplace benefits, here are four topics that should resonate with near-retirees.
Saving in the Home Stretch
It’s good to start with the basics, reminding employees that they have opportunities to set aside tax-advantaged savings in traditional and/or Roth workplace retirement plan accounts. If your plan permits them, discuss the value of catch-up contributions.
The Incredible Versatility of HSAs Healthcare costs can be a big financial burden for older workers. However, relatively few employees have confidently saved for healthcare expenses, even those who participate in qualifying high-deductible healthcare plans (HDHP) paired with health savings accounts (HSAs). It’s a missed opportunity.
HSAs give employees another tax-advantaged way to save and invest for retirement. HSAs offer a triple-tax advantage.
Eligible employees contribute pre-tax dollars
Any investment earnings grow tax deferred
Withdrawals used for qualified medical expenses are tax-free
Of note, after age 65, HSA savings can be withdrawn for any purpose without a penalty (although distributions used for non-medical purposes may be taxable). The funds can be used to reimburse premiums for some Medicare costs, as well as healthcare costs not covered by Medicare.Typically, eligible employees can continue to make HSA contributions until they apply for Medicare or Social Security.
A Primer on Social Security and Medicare Benefits
Almost half of employees want employers to educate them about Social Security and Medicare benefits.[1] Employers can provide programs that offer insights on how to optimize Social Security benefits and make Medicare decisions, or they can hire a knowledgeable professional to provide individual counseling.
Either way, it’s important to manage expectations of Social Security. The most recent Trustees Report estimated that Social Security Trust Fund reserves will be depleted in 2034. Unless Congress acts, benefits may be reduced by 20% in the future.[2] Since Social Security benefits are one of the few guaranteed income options available, it may be beneficial to discuss other guaranteed income options as well.
The Advantages of Account Consolidation
It is not uncommon for adults to have held 12 or more jobs throughout the course of their careers. If they left assets behind in former employers’ workplace retirement plans, account consolidation could help clarify how much they’ve saved and how their savings are invested. In addition, if your workplace retirement plan allows roll-ins, account consolidation could potentially lift average plan balances and lower plan expenses.
The Future is Bright
Near-retirees are receptive to education and communications about saving for the future. Employers who offer programs that help smooth the transition from work to retirement often realize benefits, including greater employee loyalty and improved productivity. If you would like more information, please get in touch.
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
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Discover insights into retirement plan design for a multigenerational workforce. Find out ways to boost retirement readiness and deal with issues unique to each generation. Understand the best methods of retirement saving from Baby Boomers to Gen Z.
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
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Practical tips for Gen X and Millennial workers to save for retirement
Life in the middle can be a pickle—just ask any mid-career employee. They’re often caught between a rock and a hard place, or, more accurately, a kid’s college fund and an aging parent’s medical bills. Add to that the rising cost of living, and you’ve got a perfect storm for financial stress.
Did you know that 59% of Americans think money can buy happiness? With the magic number being $1.2 million. Interestingly though, for a significant portion of your workforce, financial happiness is tied to timely bill payments (67%), being debt-free (65%), and maintaining a healthy work-life balance (44%), thus highlighting the connection between financial security and happiness.[1]
Of note, 73% agreed that a solid financial plan leads to greater happiness.1 Here are some ways you can help your mid-career employees through life challenges and assist them in pursuing their retirement savings goals.
Confirm Retirement Savings are on Track
Mid-career employees still have time on their side. By encouraging them to review their retirement contributions and plugging their information into a financial calculator, it could make the difference between retirement stress or retirement success.
1 – 5% deferral | Potentially insufficient to replace future income needs
6 – 8% deferral | Better but below recommendations
10 – 15% deferral | Recommended by industry experts
Leverage Financial Wellness Platforms
We live in a digital age where there’s an app for everything, even financial wellness. By offering access to these platforms, you can empower your employees to take control of their finances. These platforms often include features like budgeting tools, financial health scores, and savings goal trackers. Adding these financial wellness apps to your employee benefits may greatly improve job satisfaction, retain employees longer, and increase workplace productivity.
Consider Family Caregiver Support Programs
Research shows that 56% of employees consider themselves caregivers.[2] Many mid-career employees are part of this “sandwich generation,” simultaneously raising children and caring for aging parents. Offering family caregiver support programs can help reduce this burden. This could be as simple as flexible work hours to accommodate morning drop-offs and afternoon pick-ups for children. It could also include more comprehensive support like resources for affordable care, aging-in-place, legal advice, and/or help with financial planning.
Because Education Isn’t Cheap
For employees who have children, one of the significant financial burdens for mid-career employees is saving for education. By offering information and access to 529 plans—tax-advantaged savings plans designed to encourage saving for future education costs—you can help reduce this stress.
However, a word of caution: as much as parents value their children’s education, it’s important to remember that while loans are available for college, the same cannot be said for retirement. So, encourage your employees to save for themselves first.
Emergency Savings, Withdrawals, and Loans
The SECURE Act 2.0 has introduced two new employee options aimed at enhancing financial flexibility:
Payroll deducted emergency savings or “sidecar” emergency savings accounts: Non-highly compensated employees can contribute up to 3% of wages into a capped $2,500 Roth-like account. Excess contributions spill over into their Roth account. Notably, the first four yearly withdrawals from this emergency savings account are free.
Penalty-free emergency withdrawals: Another provision allows any participant to make a one-time, non-loan withdrawal of up to $1,000 from their retirement savings for emergencies, without the usual 10% tax penalty. The process requires minimal paperwork and can optionally be repaid within three years. Because this is not a loan and requires minimal paperwork, it could save busy HR professionals and administrators time and streamline the distribution processes.
While it’s advisable to leave retirement savings untouched, life happens. Providing options for loans or hardship withdrawals from retirement accounts can be a lifeline for employees facing financial difficulties. However, it’s crucial to educate employees about the potential impact on their retirement savings to help them make informed decisions.
Leveraging Empathy
Empathy is key when helping your mid-career employees overcome these hurdles. Establish a relationship with a specialized retirement plan consultant to help understand their unique challenges. Listen to their concerns and provide them with the tools and resources needed to achieve their retirement savings goals. Remember, a financially secure employee is likely to be more engaged, productive, and loyal—factors that can significantly contribute to your company’s success.
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
Ways to boost financial confidence and loyalty for Gen Z employees
Have you ever found yourself pondering the classic “If only I could rewind the clock and share some pearls of wisdom with my younger self” scenario? As an employer, you have the chance to share this knowledge with your employees, especially when it comes to saving for the future.
The Impact of Early-Career Saving Hurdles
While everyone encounters challenges, certain obstacles tend to affect individuals early on in their careers more than their senior counterparts. Factors such as inflation, the cost of living, student loans, and impulsive retirement plan cash outs can significantly influence their financial well-being.
Gen Z employees, aged 18-24, emphasize that their overall well-being significantly influences their productivity. Many hold high expectations of their employers, expecting them to take responsibility for their financial wellness, provide retirement income, and offer guidance on investing in their retirement plans.[1]
Let’s explore some of the challenges faced by employees in their early careers and discuss practical solutions we can help implement to empower them.
Combating the Burden of Education Debt
Now that the student loan freeze has ended, some individuals are encountering this issue for the first time, while others are readjusting. The weight of education debt can hinder the employee’s ability to contribute to their retirement savings, delaying their progress toward financial independence. Under the new rules in SECURE 2.0, employers can match contributions to retirement plans based on employees’ student loan payments. This benefits individuals with student loans who might have refrained from contributing to a retirement plan, thereby missing out on employer matches and potential long-term savings. This simplified approach removes the complexity associated with previous non-elective contribution programs, which were subject to strict design and compliance requirements.
Saving in the Face of Inflation
Additional forces such as high cost of living and inflation serve as barriers to retirement savings, but younger employees seem to have the desire to save.
To encourage saving, the IRS provides a special tax credit, offering low- and moderate-income earners an additional incentive to save for retirement. If employees qualify for the Retirement Savings Contributions Credit, or Saver’s Credit, they might reduce their tax bill by up to $1,000 ($2,000 for a married couple filing jointly).
The Gift of Time in the Market
With time on their side, even small savings increments will have time to compound. This is where automatic plan design can be a very powerful tool to nudge savings.
Auto-enrollment ensures that employees are automatically enrolled in a qualified retirement plan. This enhances participation while maintaining flexibility, as employees have the option to opt out at any time.
Auto-escalation gradually increases employees’ contribution rates over time, typically by 1 – 2% per year. This feature not only instills a savings habit but also helps employees grow their retirement savings without requiring active involvement.
Preventing cash outs is another way to keep employees invested. This can be done by limiting loans at the plan level. Additionally, it is an opportunity to educate employees on their roll-in and rollover options when joining or leaving the company.
Encourage younger employees to save, keep saving, and roll over their retirement assets, no matter how small. This habit will help them develop a continuous savings pattern which can set them up for a financially secure future.
Increasing Financial Literacy
Because many employees look to their employers for help with financial wellness, an opportunity exists to make an impact. By offering employee education resources or one-to-one meetings, we can help employees build financial confidence. This empowers them to make smart choices, affording them a feeling of control over their financial future.
Elevate Savings
Addressing the early-career savings hurdles requires a multifaceted approach. Employers who invest in their employees’ financial well-being not only contribute to a more secure retirement but also foster a workforce that is engaged, focused, and motivated. By exploring these solutions, companies can play a vital role in empowering their employees to overcome financial challenges, which can set the stage for a prosperous and secure future.
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
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In this newsletter, we will discuss organizing fiduciary files and benchmarking your retirement plan to help you enhance your fiduciary plan governance. Plus, we explore how profit sharing can help reduce your company’s tax liability and express gratitude towards your employees.
By implementing these strategies, you can further strengthen your fiduciary governance practices and contribute to the long-term financial well-being of your employees.
Please don’t hesitate to reach out to our team. We are here to support you every step of the way.
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
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It is more important than ever to prioritize the security of your company’s retirement plan. The Department of Labor (DOL) has recognized this urgency and has issued recommendations to help employers safeguard their plans.
For plan fiduciaries, there are many ways you can apply these best practices to effectively manage your company’s retirement plan. Read the checklist below and for more detailed information, refer to the full ‘Cybersecurity Program Best Practices – EBSA’ document here.
By implementing these guidelines and incorporating cybersecurity best practices, you can significantly mitigate the risk of cyber threats such as data breaches, fraud, and theft.
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
The SECURE Act 2.0 is giving business owners an opportunity to start a retirement plan with three enticing tax credits. Learn more about credits to offset startup costs, automatic enrollment and employer contributions.
With these tax credits, business owners can confidently set up a retirement plan, save money and thrive in an ever-changing economic climate.
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
While your retirement plan may not have a chirping reminder, regular reviews, fee benchmarking, and a prudent process are key.
Just as we routinely replace the batteries in our smoke detectors, it’s equally crucial to give your company’s retirement plan the attention it deserves.
Often, qualified retirement plans are treated like a smoke detector with fading batteries – they’re there, we know they’re there, but unless there’s an alarming beep, we don’t really bother to examine them in detail. But just as you wouldn’t overlook a chirping smoke detector, you shouldn’t neglect your company’s retirement plan, either.
As a plan sponsor, it’s vital to regularly review your retirement plan and benchmark for fees, services, and overall value.
Striking the Right Balance
Every employer has unique needs and preferences for the company’s retirement plan. Some prefer comprehensive plans with features like financial wellness resources, one-to-one education, onsite educational meetings, regular benchmarking analysis, and hands-on consulting. Others favor a simpler approach, with annual investment committee meetings, virtual employee education, online access to financial education, tri-annual benchmarking reports, and periodic vendor analysis.
Regardless of your preference, the key is to ensure that the costs and value of your plan are aligned. If you have ever used dollar store batteries for your smoke detector, you know that the low price means you need to change them out more often which may be more labor intensive and expensive in the long run. So, it’s not about finding the cheapest offer, but rather about finding a plan that is reasonably priced for the services received.
The Need for Regular Reviews
Regular reviews serve as an early warning system for your plan. They help you track your plan’s investments, fees, features, and benefits. You’ll be able to spot any potential issues early on, much like detecting a low battery signal from your smoke detector.
Here’s a quick guide:
Topic
Warning Sign
Action
Investments
Underperforming fund
Replace fund
Fees
Benchmark to peer group
Ask for a fee reduction
Payroll
Clunky uploads
360 integration
Participation
Less than 90%
Re-enrollment
Employee Education
Low contribution rates
Implement a robust education program
Decoding Plan Fees
Plan fees can vary widely. But as a plan fiduciary, what’s crucial is that you’re aware of what you’re paying and that it’s reasonable for the services received.
Fee reasonableness is necessary because ERISA requires plan fiduciaries to act prudently and solely in the interest of the plan’s participants and beneficiaries. This includes ensuring that the fees paid for services are reasonable and the plan receives fair value for those services.
The importance of maintaining a prudent process and regularly benchmarking retirement plans has been underscored by several court cases. For instance, in the case of Sacerdote v. New York University, the court highlighted the necessity for plan fiduciaries to follow a prudent process when selecting and monitoring service providers. Similarly, in the case of Tussey v. ABB Inc., the court ruled that the plan fiduciaries breached their duties by failing to monitor recordkeeping costs and negotiate for rebates from the service provider.
These cases highlight the significance of having a robust process in place to regularly review and benchmark retirement plans, reinforcing the importance of fee reasonableness and the duties of plan fiduciaries under ERISA.
We’re Here to Help
If you need help decoding your retirement plan fees, look for your 408(b)2 document. This document will provide a detailed breakdown of the costs associated with your plan, allowing you to make an informed decision about fees, and we can help you run a benchmarking report to determine if your fees are reasonable for the services provided.
Working Order
Just as we ensure our smoke detectors are in working order, it’s crucial to sit down with an experienced retirement plan consultant to review your company’s retirement plan. Remember, we’re here to help ensure your retirement plan is in top shape.
So, don’t treat your qualified retirement plan like a chirping smoke detector any longer. Give it the attention it deserves. After all, a well-maintained retirement plan is a smooth ride toward a secure future.
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
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Helping employees in their financial journey can begin by giving them resources on saving best practices.
Savings buckets involves dividing money into separate accounts (buckets) each with a specific purpose. Rather than blindly putting money to the side, this gives employees a more organized system of saving and spending.
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
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