Given the results of a recent study by the Employee Benefit Research Institute that show only 13% of Americans feel confident that they will have enough money in retirement to live comfortably, the time has come for employers to take a more aggressive approach with the plans they are offering. When we were growing up, it was the employer’s full responsibility to pay for our retirement. The pendulum has swung completely in the opposite direction where through a 401k, it is really the employee’s responsibility to save. Yes, there are matches or even some profit sharing contributions among employers, however the vast majority of the funds come from the employees.
We believe that when it is administratively possible, employers should adopt auto enrollment plans with a base of 6% and include an auto escalation each year. The whitepaper “Courageous Retirement Plan Design” would suggest even more aggressive measures. In addition, where the more highly compensated cannot save enough in their 401k plan, we feel the employer should consider offering supplemental qualified plans or non-qualified plans if they are a better fit. Regardless, the goal should be retirement readiness and unless you want to be employing people late into their 70’s, now is the time to review your plan design and figure out ways to help people maximize what they can save.
