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?
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