Retirement Meditation #36: How can I use my 401(k) plan to attract and retain talent?

Insights | Retirement Meditation #36: How can I use my 401(k) plan to attract and retain talent?
Women at a business meeting

Author: Paul A. Carl, CHSA, CPFA Vice President, Retirement Plan Consulting, Registered Representative

“Jerry’s” personal mobile device rang around 10 p.m. one night. A former-colleague now working for a competitor called to let “Jerry” know that he would be the perfect candidate to fill a leadership role at her firm. After several months of negotiations, “Jerry” declined an opportunity that would have increased his base compensation by nearly 70% and delivered an overall potential rewards package exceeding 2-times his current total compensation package. Why did “Jerry” stay in his current role? “Jerry’s” evaluation of the competitor’s offer did not stop at compensation. “Jerry” considered other factors including work-life balance, cultural fit, and the benefits delivered by his current employer’s 401(k) and non-qualified deferred compensation plans.

Fidelity Investments annually publishes its Fidelity Institutional Insights: Plan Sponsor Attitudes Survey (“Fidelity’s Plan Sponsor Attitudes”). For the 13th edition published in 2022, Fidelity Investments compiled data from 1,285 defined contribution plan sponsor respondents. Among the top goals reported by Fidelity’s Plan Sponsor Attitudes, 27% of plan sponsors wanted their plan to “Attract and retain top employees to remain competitive in the workplace.” Additionally, 25% reported as a top concern, “Whether the plan is helping to attract and retain top talent." At the Retirement Plan Advisory Group (RPAG) 2022 National Conference, Whitney Jones, Retirement Plan Consultant, CPFA, AIF of Premier Wealth Management in Florida, shared her perspectives and salient advice with other retirement plan advisors: “Help (your clients) to recruit and retain talent.” 

Attracting and retaining talent, especially the right talent, is on the mind of employers. There is a way to use the 401(k) to help accomplish these tasks through plan design. The best plan design for any employer is one that integrates the employer’s culture with the employer’s budget. A best practice for employers that follows appropriate plan design includes effectively communicating the advantages of that plan design to current employees and prospective employees. Plan provisions to communicate can include:

•    Shortened eligibility period and frequent plan entry point(s)
•    Employer matching contributions, especially those exceeding industry averages
•    Safe harbor features allowing highly compensated employees to defer maximum dollars
•    Roth features including in-plan Roth conversion provisions
•    Profit sharing, especially allocation formulas creating additional retirement savings
•    Accelerated vesting schedules
•    Availability of participant loans and in-service withdrawals including hardship 

In some cases, the qualified retirement plan may be insufficient to meet some employees’ needs. The introduction of a non-qualified plan can often help an employer differentiate itself.

Who can you least afford to lose from your employment?

The content of this blog is offered by HORAN Wealth Management, an SEC registered investment advisor. This information is not intended to serve as legal advice or as a substitute for the advice of your own counsel and should not be relied upon as such, as the advice appropriate for you will be dependent upon the particular facts and circumstances of your situation. Linked Websites: We provide links to other sites that we believe may be useful or informative. We do not take responsibility for links to third-party content or the accuracy of the content itself. Any links to third-party sites, or information therein, are not intended as and should not be interpreted by you as constituting or implying our endorsement, sponsorship, or recommendation of the third-party information, products, or services found there. Please note: clicking on external links means you will be leaving this Website; you assume total responsibility and risk for your use of the site(s) you are visiting. Neither the information nor any opinion expressed constitutes a solicitation to use our services or to purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results. Market conditions can vary widely over time and there is always the potential of losing money when investing in securities. HORAN and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only and is not intended to provide and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.