When it comes to your retirement plan, keeping your participants engaged is a must.
Not only is providing participants with enrollment opportunities in a timely manner critical to keeping your plan in compliance, it is also an important step in their retirement success story. Although the matter of when to provide enrollment materials to a participant will depend on the plan’s eligibility and entry requirements, continuing the conversation over time is also a component that cannot be overlooked.
- If your plan allows new employees to participate on their first day of employment, the plan enrollment paperwork can be included in the new hire materials. Care should be taken so the plan paperwork doesn’t get lost among the rest of the onboarding information. If you use an online checklist to go through the various types of new hire forms, a link to the plan enrollment should be provided as well.
- If your plan has monthly or quarterly enrollment, provide the enrollment material and Summary Plan Description (SPD) with enough time for the employee to review the information and make an informed decision. In most cases, the SPD must be distributed within 90 days of the employee becoming a participant. However, giving it to them before entry can help them better understand the plan.
- If one of the plan’s entry dates corresponds to your company’s annual benefit enrollment, include the plan information with the rest of the benefits material. Although some of those employees may already be enrolled, this is a great time to remind staff of what’s available with the retirement plan, which may lead to them increasing their contributions.
Once the initial enrollment period is completed, communication should continue with employees regardless of whether or not they chose to participate by contributing to the plan. A decision made in the past may not represent where an individual is now. Reminders as time goes on will benefit all plan participants.
- Employees who opted out of participation in the past may now be ready to start saving for retirement.
- Participants who stopped deferring based on their financial situation may be persuaded to start again.
- As plan compensation increases, participants may be encouraged to increase their plan contributions.
- Participants might increase their contributions if they realize they are not deferring at a high enough percentage to take full advantage of a matching employer contribution.
There are natural times to communicate with your participants about plan participation. Those times include when communicating updated limits, sending annual notices, and completing performance reviews.
- The Internal Revenue Service (IRS) updates retirement plan limits every year on January 1. When you inform your staff of the updated annual limits, be sure to include instructions for beginning and increasing contributions.
- Most plans are required to provide annual participant notices, along with the Summary Annual Report (SAR). Any time that you share plan communications with the participants is a great time to re-emphasize the benefits of the plan. Encouraging them to meet with the plan’s investment advisor will provide a great resource for questions about investing in the plan. The more that they are encouraged on an ongoing basis to understand the accumulated benefit of contributions to the plan—rather than just at the start of being eligible—the better prepared they will be.
- Performance reviews can also include a review of retirement readiness. If the participant is not contributing to the plan, that one-on-one conversation can go a long way towards helping the employee and their financial health. Additionally, consider the needs of both remote and in-office staff to ensure they all receive the necessary information and the opportunity to ask questions.
The more often you communicate with your staff about the retirement plan, the more successful your plan can be. The more successful your plan is, the more your participants will be prepared for retirement.
This newsletter is intended to provide general information on matters of interest in the area of qualified retirement plans and is distributed with the understanding that the publisher and distributor are not rendering legal, tax or other professional advice. Readers should not act or rely on any information in this newsletter without first seeking the advice of an independent tax advisor such as an attorney or CPA.
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