Automating your employees’ savings and investment decisions can significantly impact your employees’ retirement nest egg. Today, we will be going over four ways to automate your plan.
Before we get into our main topic, click here for a free copy of our book “The Quintessential 401(k).” The information in this book will help you learn more about our powerful 401 (k) solutions.
Also, if you would like to receive a complimentary benchmarking analysis of your current plan, click here and we would be happy to help. Now, let’s continue with our four automation solutions.
- Auto-enrollment. This feature helps to get employees enrolled in your plan efficiently and effectively, without the need for them to go online or fill out paperwork. Auto-enrollment eliminates the stress that is otherwise associated with typical enrollment processes.
- Automatic QDIA (qualified default investment alternative). You might be asking yourself, “If I auto-enroll an employee, how does the company make an investment choice for them?” This is where automatic QDIA comes into play. This feature automatically sorts employees into an age-appropriate investment option. When you follow this process and give the customary 30-day notice, you are protected under the Pension Protection Act of 2006.
- Automatic escalation. Once you’ve already utilized these first two solutions, the next step is to help your employees increase their savings over time. Most people need to save at least 10%, but we typically start employees out at 6% when they are auto-enrolled. Automatic escalation is critical in making sure your employees automatically build their savings rate by 1% each year until they reach the point where they’re saving at least 10%. You can reference the chart on page 38 of our book to see the powerful results this solution can bring.
- The stretch match. Many employers use a matching formula to help their employees save for retirement. As you know, most employees will save just enough to get the match. But the ideal matching structure encourages employees to save at a higher rate while not increasing costs for the company. See page 42 of our book to see how you can do this for your plan.
Stay tuned for our upcoming future videos, where we will discuss each of these solutions in detail. If you have any other questions, would like more information, or are ready to take action and maximize the effectiveness of your plan, feel free to give me a call or send me an email. I look forward to hearing from you soon.