PLANSPONSOR - October/November 2021 - 20

PLAN BENCHMARKING | COVER STORY
Charlotte, North Carolina. " They say, 'We've seen our [participation
and average deferral] data, and we realize there are discrepancies
between different races and ethnicities in our workforce,' "
he says. " We think we'll see more employers do that. It's a way to
make the plan more equitable for everybody. "
* Position your match accordingly. Asked about
their match rate, employers surveyed for the 2021 PLANSPONSOR
DC Plan Benchmarking Survey (see " Lay of the
Land, " page 22) most frequently cited a maximum employer
matching contribution of 4%, with roughly one-in-three (34%)
of them saying that.
The employer match is often the thing that employees most
know and appreciate about their 401(k) plan's design features, says
Ty Parrish, a partner and practice leader in Cerity Partners' retirement
plan services group in Tampa, Florida. " As an employee, I'd
take a 10% profit-sharing contribution all day over a matching
contribution, " he says. " But it's interesting to see the psychology of
employees, of how they view the value of things. " He says, based
on his experience, employees typically think a matching contribution
is better. " They prefer a high match to a profit-sharing contribution,
because they don't understand profit sharing as well. "
How much the employer match's value resonates with a
particular employer's workforce and potential hires depends in
large part on employees' age, says Jamie Greenleaf, lead adviser
and principal at Cafaro Greenleaf, a OneDigital company, in Red
Bank, New Jersey.
" Right now, there's a war for talent, and younger employees
are looking for additional types of benefits [such as student
debt repayment], so for them the 401(k) match is the cherry on
top, " Greenleaf says. " The match is a great add-on, but not the
benefit that drives the younger population, " she says. " Other,
more-seasoned employees think differently about the retirement
plan and recognize the value of the match. "
To figure out the right match level, employers should start
with analyzing data on the demographics of their organization's
employees, Greenleaf says. Employers also need to think about
the goals and objectives of their benefits package overall and
where the retirement package fits into that as a priority, she says.
" Then they need to look at their employee turnover data and what
the employers they compete with are offering, " she adds.
Employers have started to move toward more options in how
participants can utilize the employer contribution across benefits
programs, Ming says. " For the first time ever, we're seeing
the preferences of employees change, to where they want more
flexibility, " he says.
" More employees now want the opportunity to use the
employer contribution to help them pay off their student loan debt
or accumulate emergency savings, " he continues. " Employers
should think about changing their plan design so employees can
customize their use of the employer contribution, based on their
individual needs. The reality is that saving for retirement is typically
more urgent for people in their 40s and 50s than it is for
people in their 20s or 30s. "
* Allow quicker vesting. Asked how long before
their plan participants vest 100% in the match, 39.7% of sponsors
surveyed for PLANSPONSOR's benchmarking survey said
immediately upon enrollment.
Employees like the rewards of a faster vesting schedule,
Parrish has seen. " With immediate vesting, if you're an employee,
the money is yours from day one. I think people raise their eyebrows
to that and say, 'Wow, that's a good deal,' " he says. That option
costs an employer more in the short term than longer vesting, of
Competitive Benchmarking
J
ust because the employers you compete
against for talent offer something
in their workplace retirement savings program,
this does not mean you should rush
to do the same.
" I think it's always good to take a
'pulse check' on your retirement plan's
features, " Alight Solutions' Rob Austin
says. " At the same time, companies should
not necessarily be reactive.
" It's good to say, 'Let's make it a goal
to [periodically] reassess and see where
we are,' " Austin says. " Look at data for
other employers, and see where are things
moving? Are you in the majority on the
plan features you're offering, and, if not,
why not? My suggestion is, question
everything, and be able to really articulate
why you have the plan provisions
you have. " It can make sense to diverge
from the current trends, such as a highturnover
employer having a one-year eligibility
rule for 401(k) plan participation
instead of immediate eligibility. In other
cases a long-time plan feature may be
outdated, such as an employer no longer
seeing a rationale for allowing three loans
outstanding instead of one.
Employers should not just add whatever
new programs and features other
employers implement, Cafaro Greenleaf's
Jamie Greenleaf agrees. " It really comes
down to, each employer is unique, and
you have to really understand your culture
and the individuals in your organization
to determine the best benefits for you to
offer, " she says. " To blanket your benefits
program with the new 'hot item' could be
a big waste of money. " -JW
20 PLANSPONSOR.COM October - November 2021
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PLANSPONSOR - October/November 2021

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