Retirement Plan Design: How to Increase Employee Participation, Outcomes and Savings

Successful retirement plans have several things in common. They generally have high employee participation and contribution rates as well as a high percentage of participants who are on track for a financially secure retirement. So, how can employers (plan sponsors) design their retirement plans to reach these goals?

1. Identify plan goals and objectives.

The first step in achieving your goals is deciding what they should be. Employers who offer successful retirement plans typically focus on helping their staff save well so they can retire at an appropriate age and maintain a similar standard of living.

An example of a good, measurable target goal would be the 90/15/90 rule:

• Aim for 90% employee participation.

Divide the number of actively contributing employees by the total number of eligible staff members to find out your current participation percentage.

• Work toward a 15% contribution between the employer and the employee.

Industry experts recommend saving 15% of one’s income (a combination of employee and employer contributions) for retirement. Create an employer matching scenario that encourages your staff to contribute more toward this goal. Keep reading to learn how employer matching can help boost participation and giving.

• Strive for 90% of employees to invest in an appropriate asset mix.

Run reports with your retirement plan provider to see if your staff is investing prudently.

2. Engage staff members through matching and automatic features.

Once you’ve identified your goals for the retirement plan, consider implementing these best practices to increase staff engagement and participation:

• Automatic enrollment is a plan feature that can be implemented across your organization. You have the flexibility to enroll only new staff members or all staff members at once in the retirement plan with a predetermined employee deferral — usually around 5-6% of the staff member’s salary. Once employees are automatically enrolled in a retirement savings plan, very few decide to opt out.
• Employer-matching contributions are another common incentive that offer a built-in motivation to keep your staff on track for retirement. For example, the employer could provide a basic 5% non-matching contribution for all staff and an additional 5% matching contribution for any staff member who contributes his or her own salary deferral. In this case, if a staff member takes full advantage of their retirement plan by contributing at least 5%, then he or she would reach the savings target of 15% of their compensation. Learn more about how to structure an employer match at your organization.

3. Focus on driving employee participation.

Regularly promoting retirement awareness and providing educational materials to employees is key to enhancing their use of the plan and allowing them to develop a savings strategy of their own.

Some examples of implementing employee education include:

• Holding periodic meetings to review employee benefits
• Sending emails highlighting the available matching contribution, saving strategies and diverse investment lineup

Encouraging employees to utilize the GuideStone member journey and other free resources on saving for retirement.

4. Track progress and success.

To see plan development and growth, it’s important to track your progress annually to help ensure the optimal health of your retirement plan. You can do this by:

• Conducting annual retirement plan reviews to evaluate progress and direct educational focus for the new year
• Measuring plan participation rates and contribution trends annually to monitor staff engagement
• Evaluating retirement readiness by reviewing average account balances and trajectories of participants with the goal of replacing a specified percentage (e.g., 75% or 85%) of their projected pre-retirement income at retirement. The greater the number, the more successful your plan.

These four action steps can help you and your staff members reap the full benefits of your retirement plan. Plus, the GuideStone Employer Access^® Program (EAP) allows administrators to generate numerous reports and gather the information you need to help determine some of these metrics.

Contact your relationship manager or a GuideStone representative to help you learn more about how EAP can help you evaluate your plan’s effectiveness.

For more information, contact us at Info@GuideStone.org or 1-888-98-GUIDE (1-888-984-8433), Monday through Friday, from 7 a.m. to 6 p.m. CT to speak with a customer solutions specialist.

The information in this article is for educational purposes only and is provided with the understanding that GuideStone is not rendering legal, financial or tax advice. We encourage you to consult with appropriate counsel and other advisors on all of your unique financial obligations and requirements.