With health care costs rising and the uncertain future of government retirement options, corporate retirement plans are a large incentive for employees. For a business owner, determining the specific needs and goals of your company’s benefits package may seem overwhelming.
It is important to enlist the help of a professional that is well-versed in the Employee Retirement Income Security Act (ERISA) and can help identify the specific needs of your company, says Daniel Kissinger, vice president and retirement plan specialist with FirstMerit Bank. Each company’s plan will differ, so it is necessary to find a professional who will ask the right questions to find the plan that fits your needs, he says.
Smart Business spoke with Kissinger about the benefits of retirement plans and what business owners should look for in benefit administrators to receive the best service possible.
Why have retirement plans become a competitive part of a benefits package?
For the business owner, it is a competitive business world where he or she looks for the best way to recruit quality employees and retain those who are currently employed. Benefits packages play a large role in employee recruitment and retention. There are also tax advantages for employers who offer retirement plans in their benefits packages.
Employees are often looking for the best benefits package when they select an employer. A good 401(k) plan is important because it provides employees the ability to save money on a pretax basis for their own retirement. With the uncertainty of the future of social security, it is important for employers to realize that retirement savings now fall solely in the hands of the employee and that they should offer benefit plans to help. Offering a retirement plan helps to increase an individual’s personal wealth. This shows employees that, as a business owner, you care about their future and well-being.
Is a retirement plan a benefit that an employer has to offer to stay competitive?
Employees are currently looking at the overall package an employer can offer. In the past, salary was usually the deciding factor when an employee was selecting an employer. Changes in the benefits industry have made it necessary for employees to search for the most competitive package.
Employers are responding to this demand accordingly in an attempt to stay competitive. In the last 10 years, almost all employers began offering some type of retirement package. Employees are also looking to see what their employers will contribute to their retirement fund. Some companies are able to match a portion of what employees contribute, which makes the package more enticing.
Not all employers are able to match what employees contribute to their fund. Even if the employee is the only member contributing to the fund, it is pretax and is therefore at a cost-saving basis.
What expertise and/or qualities should business owners look for in an administrator?
A business owner should look for administrators who are experts in ERISA. You do not want a broker who is selling a product. Rather, one should look for an administrator who is an expert in the retirement industry and can be contacted directly to service the needs of your company.
Choosing a full-service provider that can serve as corporate trustee of the plan is vital, as it greatly reduces the personal fiduciary responsibility of the business owner. Depending on the size and location of your company, a local administrator may be more advantageous because you have a better chance of receiving personalized, high-touch service. Additionally, it is beneficial if the provider does not offer any proprietary mutual funds. Offering strictly third-party mutual funds allows for better diversification of investments and gives the business owner the opportunity to offer top-performing mutual funds in each of the various categories.
What role should an administrator play in the developing of a retirement plan?
An administrator should fill the proactive consulting function. This means an administrator should look at the needs and goals of the overall plan and work to redesign the benefits plan as needed to maintain those goals. Administrators should also visit the company and employees to conduct employee education meetings once or twice a year. General topics are discussed in these meetings in an attempt to get employees comfortable with the administrator. Many employers hire administrators to field employee questions and address their needs. This helps limit the time and resources the business owner must devote to dealing with participant issues. An effective administrator takes the work off of the business owner's desk.
DANIEL KISSINGER is vice president and retirement plan specialist with FirstMerit Bank, servicing Lorain, Cuyahoga, Lake, Geauga and Ashtabula Counties, along with the Toledo region. Reach him at email@example.com or (216) 694-5697.