Karena Gruber, The Climate Trust
June 21, 2017
Managing a company’s 401(k) plan is an important and often overlooked aspect of an HR Managers job. Definitely not the thing I talk about at cocktail parties! Yet, this is a key component to anyone wishing to live out their retirement years comfortably.
To help ensure The Climate Trust provides the best resources for our employee’s retirement, I recently attended a 401(k) training put on by The Plan Sponsor University (TPSU). During the day-long workshop, I learned that one of the 401(k) plan changes implemented by The Trust was cited as a best practice to increase employee participation. You can see me talk about it here:
Switch To Match From Automatic Contribution Leads To 100% Participation At Not For Profit
By moving away from a 3% automatic employer contribution, and instead requiring participants to enroll to get the match, The Trust increased our enrollment to 100%. We also increased the amount we matched, giving staff up to 4% for a 5% contribution. This gives all employees additional earnings towards their retirement.
For example, if an employee makes $2,000/month, under the old model they would be putting away $60/month, under the new model, someone maxing out the match would save $180/month. Over 15 years this employee would save an additional $41,800! And, that assumes no increases in contribution amounts.
With this example, it’s pretty clear that there is a huge potential to impact the financial future of your team by offering thoughtful plans that encourage employees to contribute.
Next up, auto-escalation.