Finance

By Mark Olsen, Managing Director at PlanPILOT

With the continued shortage of quality workers to fill emerging available jobs across the growing economy, companies are recognizing that retaining older workers as long as possible has become a greater necessity. In addition, managers and HR directors are realizing significant advantages of this growing employee demographic. Along with their accumulated wisdom and experience, late-career employees are still interested and able to stay employed. They also embrace desirable employee habits, such as a traditional work ethic, a duty of care toward their responsibilities, and steady reliability.

To incentify such individuals to stay, however, it may be worthwhile to revisit your benefits program and look at what upgrades or enhancements might be implemented to accommodate older employees in your workforce. Here are some suggestions.

Address Older Worker Healthcare Needs

It’s no surprise that healthcare benefits would be a primary concern for older workers and measures can be taken to address those needs. Contrary to what might be surmised, older workers are less prone to injury at the workplace than younger workers, but often take longer to recover from injury. Providing greater choice in healthcare options and allowing more time off for healing and physical therapy may be worth investigating. 

Having the company provide a higher percentage of health, dental, and vision plan premiums (maybe 100%) may also be advantageous. Depending upon the coverage, older workers may be willing to continue working if their employer healthcare coverage meets their needs, even if they qualify for Medicare benefits. Include coverage for physical and rehabilitative therapy.

To help older (or all) eligible employees with rising healthcare costs, implementing a health savings account program with employer contributions could be a significant benefit with several tax advantages. Employer contributions may be made whether or not a Section 125 plan is implemented. 

A Greater Interest in Insurance Coverage

Younger employees in the prime of their lives are generally less concerned about life and disability insurance, but you can be sure your older workers are quite interested in these benefits. Company-provided life and disability insurance are top-of-mind benefits for these individuals. Offering additional coverage at discounted rates may also be added.

Accident and critical illness plans would be attractive too. These insurance programs pay lump-sum benefits to workers who are either in a severe, debilitating accident or suffer prolonged illnesses, such as heart attacks, organ transplants, or cancer.

Encourage Retirement Saving With Matching and Education

Older employees naturally have less time than their younger colleagues to save for retirement. Offer them assistance with higher employer matching contributions and profit-sharing. Provide educational workshops on retirement income planning that explain the long-term benefits of payroll deferrals to retirement accounts and the higher contributions limits for those over age 50. Schedule regular visits to the workplace by investment advisors to the company plan and allow for work-time meetings so older workers can ask questions or receive updates about retirement saving, investing, and financial wellness.

Consider Legal Assistance As a Company Benefit

A lesser known but growing company benefit offered by most Fortune 500 companies is legal services. These programs can be flexible in design for the older demographic in the workplace, providing legal advice on topics specific to them, such as creating a Last Will or other estate planning documents, late-life divorce, or long-term care concerns. Individual attorney fees are expensive and getting to see an attorney outside working hours may be difficult. Arranging for legal consultations would be a welcomed and valuable benefit.

Flex-time and Other Benefits

Having flexibility in their work schedule remains a primary benefit for many older workers. At this point in their lives, maintaining a greater work-life balance is a priority, as well as the ability to schedule and meet healthcare appointments, making time to help with grandchildren care and activities, and attend to other personal or family obligations. According to a 2023 McKinsey & Company report, those 55-64 years of age cited “workplace flexibility” as the third most important reason for leaving a current job.

Providing learning and skill development programs may also be attractive to older workers. An AARP study found that the majority of older workers (especially those among minority populations) were keenly interested in learning new skills and interest increased into the 90th percentiles when employer support was provided. These conclusions help support the value of retaining older workers despite rampant accusations (over 70 percent of respondents) of age discrimination in the workplace—something every company would want to avoid.

Utilizing Professional Assistance

PlanPILOT is uniquely positioned to help employers customize and design benefit plans that meet your unique needs and objectives. If you’re ready to upgrade to a new standard for your benefit planning, reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.

About Mark

Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.

By Mark Olsen, Managing Director at PlanPILOT

It’s no secret that the advent of remote work has forced a wide range of challenges and benefits to employers and employees. Both have realized the benefits of cost savings and flexibility and are also making adjustments to accommodate each other’s goals of productivity and accountability in this new environment. And studies indicate this trend will likely continue.

One area that may be lacking appropriate attention thus far is the effect of this new paradigm on retirement plans and employee saving behavior. Studies by investment companies such as Morningstar indicate that physical absence from the office environment may be altering how employees participate in their employer-sponsored plan. The conclusions suggest that plan sponsors take measures to address and take advantage of these changes by adapting their retirement plans to accommodate this new mode of employment to foster goodwill and employee satisfaction of remote workers.

Reallocation of Cost Savings Toward Retirement

While working remotely, employees may be enjoying savings on commuting expenses, the lower need for professional attire, and not paying for lunches out. According to surveys by FlexJobs, remote workers have saved as much as $6,000 annually by working from home, and recent statistics by the U.S. Career Institute indicate savings could actually average over $10,000 per year. These savings may be redirected toward retirement plan deferrals. In addition, since the amounts saved through remote work are in after-tax dollars, the actual pre-tax amounts that could be directed toward retirement savings could be significantly more.

Employers can actively encourage employees to use these savings to increase their retirement contributions. One approach is through targeted financial education programs that emphasize how small adjustments, such as reallocating savings from reduced commuting expenses, can significantly boost retirement savings over time. Employers can also influence behavior by illustrating how saving an additional $50-$100 a month can grow over the course of a career, using personalized examples in financial wellness workshops or interactive retirement calculators.

Additionally, employers can highlight these opportunities in benefit enrollment communications or through dedicated sessions with financial advisors who explain the impact of contributing extra savings to retirement accounts. Incentivizing higher deferral rates, perhaps through additional employer matching, can further motivate employees to take advantage of the savings they’ve gained through remote work arrangements.

With lower workspace expenses, plan sponsors who have adopted the remote work culture may find themselves with extra cash flow to offer a higher employer match or profit-sharing in their retirement plans, as well as offering other employee benefits to attract better talent and retain high-value employees. Some plans may be upgraded to include educational features, professional advisor services, and other benefits.

Retirement Plans May Need to Adapt for the Remote Worker

One challenge faced by plan sponsors will be to ensure equal access to plan resources. Traditionally, participation and access required face-to-face interactions with administrators or HR, which may not be as available to remote employees, even with the availability of Zoom or FaceTime technology. Accommodations to these workers, such as virtual benefits education workshops and robust online platforms, may need to be implemented to be certain of equal access and to meet plan requirements. A side effect of implementing virtual access to resources or presentations (and a deterrent to remote employee participation) may be “Zoom fatigue,” where workers avoid or decline engaging in an additional virtual meeting that is not required by their job.

Reaching remote employees with plan information, access availability, and promoting participation may be another significant challenge. Along with the lack of normal office banter or casual communication, remote workers may feel less informed and connected to their retirement plan. This lack of connection may lead to lower enrollment and participation, especially for employee stock ownership plans (ESOPs). A MetLife open enrollment survey indicated that nearly half of remote workers had difficulty understanding their employee benefits, versus 29% of in-house colleagues with a similar issue.

Remote Workers May Invest Differently

Those who work outside their company offices are likely to be more independent in their behavior and thinking patterns. As such, their approach to their retirement account allocations and benefits may differ from their in-house colleagues. Reports indicate that remote participants may be less inclined to use default investments, such as target-date funds, and may be more interested in personalized service from plan financial advisors or prefer a wider menu of investment options or managed accounts.

It May Be Management Who Is WFH or WFA.

The demographics of remote workers play a key role in retirement saving patterns as well. 2024 statistics indicate that while 54% of junior-level employees work remotely, a full 64% of senior-level employees work at least part-time outside the office. In addition, the greater number of remote employees are found in the professional service and technology fields. Both of these groups tend to be higher-compensated and higher-educated, implying that benefits plans need to accommodate their retirement planning objectives and provide for increased retirement savings needs.

In sum, those companies with a significant remote employee population may be wise to review these effects and carefully consider how upgrading and adjusting their plans may result in greater employee satisfaction and favorable participation by remote workers.

Utilizing Professional Assistance

At PlanPILOT, our company is uniquely positioned to help you meet these objectives. If you’re ready to upgrade to a new standard for your benefit planning, reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.

About Mark

Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.

By Mark Olsen, Managing Director at PlanPILOT

Due to the significant amount of fiduciary responsibility of a retirement plan committee to both consider the best interests of the participants and properly oversee the administration of the plan, committee meetings ought to be as efficient and effective as possible. Like any other executive meeting, proper preparation and processes can deliver meaningful benefits to both the participants and the committee members themselves.

In our experience at PlanPILOT, effective preparation for plan committee meetings is a multifaceted endeavor, but doing so in a careful and structured manner should enable the committee to cover the many areas of plan administration, functionality, regulation changes, and investment evaluation. Here is a sampling of what we recommend.

Prepare a Structured Agenda

Like any other effective meeting, having a structured agenda at the ready is essential. Prepare the agenda well ahead of time and circulate drafts to committee members to solicit their input, potential sticking points, and innovative ideas. Steer and emphasize discussion topics toward critical areas of plan management to ensure due diligence requirements are fulfilled.

Investment analysis, selection, and monitoring are only a few aspects of the committee’s responsibilities. Include a comprehensive review and regulatory update of the committee’s fiduciary duties, such as overseeing plan administration and managing fees. Include elements of fiduciary training for committee members, which is a growing focus of the DOL and plan auditors. Include a rough timetable to get through the agenda while allowing adequate time for discussion and Q&A as needed. Once the meeting starts, stick to the agenda and rough timetable to avoid getting sidetracked and so the meeting ends as scheduled.

Assign Pre-Meeting Homework to Committee Members

Few things derail a meeting’s effectiveness more than unprepared committee members. Everyone should arrive at the meeting with a clear understanding of the agenda, the objectives of the discussions, and have their questions or concerns ready. Along with sending the prepared agenda to members in advance (that includes prior feedback), make sure to include—or provide access to—key documents that will be referenced or reviewed, and encourage members to review these beforehand. These documents can include investment performance reports, Investment Policy Statements (IPS), and other plan governing documents. If regulatory changes are to be considered, include summations of the changes and the implications for the plan going forward. Allow time for the members to ask and get answers to quick clarification questions ahead of time so the discussion isn’t interrupted or delayed unnecessarily.

Plan Meeting Topics Out a Whole Year Ahead

Each meeting should include the following agenda items:

• Review of the previous meeting’s minutes and acceptance by the committee
• Fiduciary training
• Investment due diligence
• Review of fund utilization

From there, if time remains, schedule other topics over the year that should cover all aspects of the plan which the committee should monitor:

• Changes in industry regulations and the marketplace

1. Updates on legislative and regulatory changes affecting the business and therefore the plan
2. Insights from recent litigation and key takeaways
3. Innovations in products or technology and emerging industry trends that may enhance or detract from future company profitability and growth

• Plan Investment Evaluation

1. Overview of financial market and economic conditions
2. Assessment of current investments against IPS standards; does the investment strategy and offerings meet these standards or is revision necessary?
3. Analysis of participant allocations across investments options; are some outdated or are new options available, requested, and viable?
4. Review of investment-related expenses; do these continue to meet industry standards and would satisfy DOL or auditor review? How do these compare with competitor or peer plans?
5. Regular discussion with the plan investment advisors as to whether changes in strategy, fund investments, and recordkeeper platform is warranted or needed

• Review of Plan Administration

1. Summary of plan activities including loans, contributions, and distributions. Are there symptoms that indicate problematic trends requiring plan amendments?
2. Examination of operational issues and testing outcomes
3. Addressing participant complaints and concerns
4. Evaluating participant education and effectiveness of these programs regarding participant understanding of plan benefits and options
5. Upcoming deadlines and reporting obligations for the plan. Are these imminent and being met in a timely fashion?
6. Potential for deficiencies as a result of annual audits and regulatory examinations

As mentioned, the complexity of plans and the inherent responsibility of retirement plan committees requires careful and diligent attention to a myriad of details. Only with careful and thorough meeting preparation can these committees efficiently carry out periodic meetings and successfully fulfill their duties and objectives.

Utilizing Professional Assistance

At PlanPILOT, our company is uniquely positioned to help you with these objectives. If you’re ready to upgrade to a new standard for your benefit planning, reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.

About Mark

Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.

By Mark Olsen, Managing Director at PlanPILOT

For a large percentage of today’s young workers, student loan debt continues to be a significant financial burden. Even with efforts by the federal government to ease loan burdens through forgiveness proposals, student loan payments are impacting the ability to move forward with their lives and financial goals. Specifically, surveys indicate that younger professionals and other workers are less willing or financially able to contribute to their employer-sponsored retirement plans, due to the high student loan payments they need to make each month.

Fortunately, employers now have a tool to help. A little-known provision in the SECURE 2.0 Act allows employers to make contributions to an employee’s retirement plan account that match the student loan repayments made by that employee each month or year. This allows the employee to both continue to make timely payments to reduce and pay off their student loan debt and grow their retirement accounts (through their own and employer matching contributions) at the same time.

Why Are Early Retirement Plan Contributions So Important?

In a word: compounding. Many studies demonstrate the importance of starting retirement contributions early in life. Early contributions allow the magic of compounding earnings in a retirement plan to grow more over a longer time period before retirement withdrawals begin. If younger workers delay starting or contributing to their employer plan accounts, they may have less favorable alternatives to build their retirement assets (e.g., saving more later on, deferring retirement and working longer, or compromising potential retirement lifestyle spending).

Advantages to Employers

Competition for talent is acute for employers. According to Bureau of Labor statistics, employees changing jobs has continued to increase since 2008. In 2023, 44 million workers quit their jobs and 3.4 million did so in January 2024 alone. Yet, hiring has still outpaced job changes, indicating employees (especially young employees) are seeking better opportunities and more attractive company benefits.

Logically, offering an employer benefit that potentially addresses a young job candidate’s chief financial concern (i.e., how to save for retirement while paying off higher-education debt) could be a key factor in attracting and retaining young talent. A higher employer match based on a young employee’s retirement plan contributions may not matter much to the job candidate if they’re unable to contribute to the plan in the first place.

Employers may also benefit from the goodwill generated by recognizing and providing a potential solution to a large societal and financial problem. Helping younger workers boost retirement savings while reducing debt can alleviate employee stress and financial concerns and promote job satisfaction and talent retention. Today’s younger generations are also looking at companies who demonstrate they care about their employees as people, not just workers.

How the Benefit Works

Employers who sponsor 401(k), 403(b), and governmental 457(b) plans or SIMPLE plans can make matching contributions to an employee’s retirement account if the employee is making regular qualified student loan payments (QSLPs) as long as the employer’s plan treats student loan payments the same as normal elective deferrals for match rates, vesting, and eligibility purposes. At present, employees must certify to their employers they are actually making student loan repayments and employers are allowed to rely on such certification without substantiation. Further refinements and regulations are likely forthcoming.

Qualified student loans are those loans utilized for qualified higher-education purposes (such as tuition, fees, room and board, etc.) as defined by IRC Section 221. The annual limit, including salary deferral elections, would be the same as allowed by the annual elective deferral limit. 

Example: Maureen, age 35, participates in an employer-sponsored 401(k) retirement plan that matches QSLPs as well as salary deferrals. The 2024 salary deferral limit for employees under age 50 is $23,000; Maureen defers $14,000 from her salary to her retirement plan. If she also makes $11,000 of QSLPs in 2024, only $9,000 ($23,000-$14,000) of those repayments can be matched by her employer. 

There are other preliminary rules that must also be followed. Since this benefit is relatively new to both employers and employee participants, careful discussion with recordkeepers and TPAs is essential, as well as providing proper and thorough education to employee-participants.

Utilizing Professional Assistance

Implementing new aspects to a retirement plan can present significant challenges to a plan sponsor, especially when considering the complexity of choices, fiduciary duties and responsibilities, and avoiding liability issues. You also want to facilitate a smooth implementation process and “get it right the first time” to foster confidence with your participants.

At PlanPILOT, our company is uniquely positioned to help you with these objectives. If you’re ready to upgrade to a new standard for your benefit planning, reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.

About Mark

Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.

By Mark Olsen, Managing Director at PlanPILOT

Employer-sponsored retirement plans are in the midst of a significant evolution in how they will be designed to serve both employers and employee participants. As I summarized in a previous blog article, in just a few years all U.S. baby boomers will either have reached (or be on the cusp of reaching) retirement age and based on statistics will likely live another 20-30 years. 

Since the age of pension income has long since passed, retirees will need to spend their retirement savings to complement whatever Social Security benefits they receive as they transition from a life of savings accumulation to one of replacing working income to meet their expenses. However, as cited in many studies, including this one, participants are ill-equipped to understand and implement strategies to efficiently obtain ongoing retirement income that can both sustain their intended expenses and outlast their retirement years.

Due to liability protections offered by the SECURE Act of 2019, employers are now able to include income features with their employee retirement plans to help participants structure their accounts upon retirement to include retirement income solutions that could suit their needs and effectively help them manage their retirement finances. Even with these new protections, however, employers may still be unsure how to implement new provisions in their plan. At PlanPILOT, we’ve observed that not enough plan sponsors are offering retirement income features, and participants may be at a loss as to how to structure their retirement finances.

Understanding Participants’ Needs and Solution Criteria

As I’ve discussed, the individual needs of participants could greatly vary, so it’s important for plan sponsors to have a deep understanding of the participants’ general financial circumstances and long-term goals. Once this understanding is achieved and quantified, plan sponsors must assess the myriad of features offered within available income strategies and solutions for the plan to create a program that can help meet most or all of the stated participant objectives.

This includes educational features that guide participants through this life transition phase and helps them make informed decisions about which solutions best suit their own needs. Having this component fosters confidence in the program and further lowers liability risk for the plan sponsor. All this is the first step in creating a fully updated and relevant retirement plan.

Selecting Solutions: What to Implement

Once the needs of the participants and criteria for plan design have been established, the next step would be choosing the income solutions to implement. According to PGIM Research, stable value funds and an income fund within a target-date offering are the most widely used vehicles for retirement income. In-plan annuities (due, in part, to the opportunities afforded by the SECURE Act) are the most popular new solution being considered.

Choosing in-plan annuities could present a hurdle to overcome: whether the current recordkeeper/investment custodian is able to offer annuities within the plan. Annuities are a product of insurance companies, and while many insurance companies offer custodial and recordkeeper services to retirement plans, if the current recordkeeper is not an insurance company, changing to accommodate the new income features may be a problem, or at least a consideration. Further, the plan sponsor still has the fiduciary duty to vet any annuities offered in the plan. Currently, there are few resources to benchmark or qualify annuities, and the complexity of annuity products may be more than the plan sponsor is willing or qualified to handle. 

Plan sponsors may also consider alternative solutions, including managed payouts, guaranteed and non-guaranteed income options, or other annuity-like contracts. It’s critical to remember, however, that while more choices may sound like a good idea, as a fiduciary, plan sponsors are still required to examine and monitor these selections to verify they are appropriate for participants.

Advice and Education

Once the implementation of selected income solutions has been completed, it’s still crucial to provide educational features and programs within the plan. Participants will need help with planning appropriately to pursue their objectives, as well as the software and other tools. Guidance and advice from qualified financial professionals may be useful, especially for those who have reached retirement income phases of life. Such participants may have questions regarding optimal times to claim Social Security, apply for Medicare benefits, and charitable giving.

Utilizing Professional Assistance

Implementing new aspects to a retirement plan can present significant challenges to a plan sponsor, especially when considering the complexity of choices, fiduciary duties and responsibilities, and avoiding liability issues. You also want to facilitate a smooth implementation process and “get it right the first time” to foster confidence with your participants.

At PlanPILOT, our company is uniquely positioned to help you with these objectives. If you’re ready to upgrade to a new standard for your benefit planning, reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.

About Mark

Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.