Small businesses looking to attract and retain committed employees may be trying too hard to offer nifty sounding new perks while overlooking classics, like a 401k. In fact, surveys reveal that employers tend to underestimate the value of offering a 401k, leading to misalignment when it comes to employee interests.
Decisions, Decisions…
When choosing where to work, prospective employees think a lot about the availability of a retirement plan—often more than employers do. In fact, Guideline has found that failure to focus on retirement plans can be a costly mistake for businesses:
According to a survey, most employers underestimate the importance of retirement benefits….The survey found that for 93% of professionals, retirement benefits influence their decision to join a company. Contrast that with only 36% of employers who rank retirement in their top 3 most valued benefits by prospective employees: It’s a detrimental misalignment….Employees still greatly value traditional benefits, according to the survey:
- 1 in 2 employees would turn down a job offer from a company that did not offer a retirement benefit.
- 1/3 of employees would be willing to trade in a lower salary for equivalent value in a retirement benefit.
- 78% of employees would not suggest their employer as a good place to work without a retirement benefit.
Digging into some of the dynamics impacting employee-employer relations “in the evolving financial landscape,” Kevin Busque, co-founder and CEO of Guideline, a 401(k) retirement platform for small businesses, advises owners to clarify their benefit strategies:
It’s important that employers re-evaluate the retirement benefits they offer—not only to make sure that they’re aligned with the needs and preferences of their workforce, but for recruiting new candidates as well. At the very least, I would suggest employers review their fee schedule. I recommend a comprehensive approach that includes taking inventory of current benefits, assessing the cost and use rates of each benefit, and evaluating employee satisfaction….It’s crucial to understand the workforce’s changing priorities and demographics….
Although many businesses are seeking out new approaches to helping workers remain content and committed, including offering more paid time off and opportunities for professional development, it’s wise to remember that when it comes down to choosing, retirement plans remain a high priority for the majority of employees:
The focus on “shiny” new perks might cause employers to overlook what’s right in front of them: a return to more traditional benefits … .One in two employees would turn down a job offer from a company that did not offer a retirement benefit. From an employer perspective, 70% of employers also agreed that offering a retirement benefit has positively impacted their ability to recruit and hire talent.While employers agree that retirement benefits are important, our research indicates that some employers underestimate their importance. In our survey, only 36% of employers rank retirement in their top 3 most valued benefits by prospective employees. Contrast that with 93% of professionals surveyed, who say that a retirement benefit influences their decision about whether to join a company. There’s a clear misalignment in expectations that could end up costing employers new talent.
With the path to secure retirement becoming more challenging given the dual dynamic of longer lives and higher costs of living, it’s not surprising that saving for older age is top of mind for so many. A U.S. Retirement Readiness Survey from Schroders found that toward retiring comfortably,“Americans think they will need to save $1.2 million; however, 46% expect to have less than $500,000 at retirement, and half of them anticipate having less than half that amount.” In many ways, increased focus on secure retirement gives plan sponsors more than ever to worry about and do. As Groom Law Group reminds us: “Being a fiduciary is about more than just avoiding lawsuits—it is about improving participant outcomes.” One way to do that is through careful evaluation of the many lifetime income options on the market. Groom Law Group’s guidance to help plan sponsors consider the benefits of lifetime income options for participants is available right here.
Expect The Unexpected…
Unforeseen challenges arise all the time, and seemingly small oversights have been triggering costly lawsuits. The average ERISA claim costs businesses over $1.2 million in legal fees.That’s where Colonial Surety comes in. When you’re armed with our cost-efficient Fiduciary+Cyber Liability Insurance, you’ll be ready for anything with:
- Reliable Defense: If a claim alleging fiduciary breaches surfaces, attorneys will be ready to fight for you, defending your company and your personal assets.
- Cybersecurity Protection: A data breach can be a nightmare, especially if it also spirals into a fiduciary breach because of failure to comply with DOL expectations. Our coverage complies with DOL recommendations–including notification and response services for the business–and retirement plan.
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Colonial Surety was founded in 1930 and continues giving customers the assurance that they, their businesses, and their clients are safeguarded with the right surety and insurance products at all times. We are a direct and digital insurer offering products through an online platform supported with exemplary customer service. We give customers a simple, direct, and instant service that takes the pain out of buying insurance and bonds. Colonial Surety is licensed in every state in the U.S., rated “A” Excellent by A.M. Best, and listed by the U.S. Treasury as an approved surety.