by Jessica Flora
Even though retirement is a major concern, employees tend to focus on the near future rather than the long term.
According to the U.S. Department of Labor, approximately 30% of employees eligible to make contributions to their employers’ 401(k) retirement plans do not participate. A way to increase participation at your company is to automatically enroll your employees in your retirement plan.
The Survey Says
According to a 2015 survey of 134 metro St. Louis and central Illinois businesses conducted by AAIM Employers’ Association, 41% of employers automatically enroll their employees in their 401(k) or 403(b) plans. Of that group, 12.6% also have automatic escalation increases annually.
Issues to Consider
If your company automatically enrolls employees, you must ensure the funds are invested according to applicable rules and regulations. The Department of Labor and the Internal Revenue Service have set forth requirements for automatic investing when plan participants have not made their own investment elections.
It is also vital to communicate plan information to employees when they are hired. Creating and providing a written policy will ensure there are no surprises when there is a 401(k) deduction on the employee’s paycheck.
Last, it is imperative to accurately keep records of any plan participation. This will provide a record of employees who are participating as well as those who elect not to participate.
Jessica Flora, PHR (solutions.team@aaimea.org) is on the Research and Solutions Team for AAIM Employers’ Association, which helps Missouri and Illinois companies manage their people and processes.
Submitted 8 years 232 days ago