After months of hibernation and sheltering in place in the face of the Coronavirus pandemic, the 50 states are re-awakening and re-opening for business.
Each state is following its own protocol, with some roaring back while others stepping more gingerly into uncharted territory. Businesses are following similar paths. Some businesses can’t wait to throw open their doors as soon as possible while others elect to go more slowly, seeking the safest route.
Whatever is right for your business, you’re either welcoming employees back to work or will soon be and all that entails with it. One of the to-dos on your list of employee engagement tasks is restarting, reinvigorating or rethinking your company’s 401(k) or other retirement plan. As you do so, know that you have several potential resources at your disposal, including your financial professional or investment representative, third-party administrator (TPA), and your MassMutual relationship manager or client engagement manager.
There are several possible opportunities for improving your retirement plan’s effectiveness, including encouraging more employees to save, convincing employees to save more, tightening your regulatory compliance, and even helping improve your employees’ financial wellness.
From a compliance perspective, it’s a good time to review your regulatory to-do list, especially your fiduciary obligations. MassMutual offers its Fiduciary Calendar online to track regulatory requirements and deadlines to help you stay on target. Your plan’s relationship manager can help you navigate the calendar, review any requirements you might have missed during the past months, and work with your financial professional or TPA to help you catch up if necessary.
One of the biggest considerations from a regulatory as well as an employee-engagement perspective is nondiscrimination testing. There are three tests: the Annual Deferral Percentage (ADP), the Actual Contribution Percentage (ACP) and the Top Heavy. The tests are used to determine if a retirement plan is benefitting all workers or only more highly paid employees. It’s an important consideration, especially if employees have stopped participating in their plan or reduced contributions.
Failing these tests can be costly for employers, especially for business owners or other more highly compensated employees. You could be required to take back some of your contributions and pay taxes on them, for instance. If your firm has failed or is in danger of failing these tests, it may be time to rethink the design of your retirement plan, re-engage employees to participate or both.
Jump starting your plan
During the Coronavirus hiatus, employee contributions to your company’s retirement plan may have been suspended, reduced or otherwise taken a back seat to other financial considerations. With food lines forming around the country as out-of-work residents struggled financially, thoughts of retirement have been postponed for many.
If you would like to reinvigorate your 401(k) and once again encourage retirement savings, MassMutual can work with your financial rep to re-engage employees on a number of fronts. What makes sense depends upon your unique situation.
If participation is a concern, your relationship manager can work in tandem with your financial rep to conduct a re-enrollment campaign. This entails promoting your company’s retirement plan to employees through a variety of mediums, depending upon the best way to connect with your workforce. The campaign will extoll the virtues of long-term saving, explain the power of compound earnings, describe the benefits of pre- or post-tax contributions, and highlight the benefits of matching contributions, if available.
Let’s say your employees are already participating in your plan in sufficient numbers but contributions are somewhat meager. MassMutual can create and launch an internal campaign to promote the rationale for employees to bump up their savings rates. Even a percentage or two of salary can make a big difference in retirement savings over several years or decades. Promoting pre-tax contributions may be a strategy to encourage employees to save more by helping reduce their taxable earnings and thus earmark more dollars to retirement without reducing their paycheck.
Sometimes, employees need educational sessions about the fundamentals of retirement planning and investing, especially in turbulent financial markets. MassMutual offers educational sessions on retirement planning as well as related financial issues, including debt management, saving for emergencies, dealing with medical expenses and other issues that have been exacerbated for many during the pandemic. Many of the sessions are available virtually.
Designing a better plan
The Coronavirus has altered America’s economic and financial landscape in dramatic ways. Given the inevitable fallout, some employers may simply need to redesign their retirement plan to help achieve different goals.
For instance, do matching contributions make sense? Some employers may currently lack the resources to continue matches. Others on firmer footing may wish to institute a match or boost their match to re-engage employees and promote retirement savings in a bigger way.
Employers that struggle with nondiscrimination testing or business owners that simply need to save more themselves may consider establishing a Safe Harbor to provide employees with a baseline of savings. Firms that can afford to make the necessary employer contributions to their plan to qualify for a Safe Harbor may open several new options for helping owners and other highly compensated employees to better prepare for retirement.
Some businesses may find now is a good time to incorporate automatic enrollment or automatic escalation into their retirement plan to encourage as many employees as possible to put their financial future on a firmer footing. Other firms whose employees are struggling financially may want to temporarily suspend automatic features with a goal of re-establishing them down the line.
Help is here
As America reawakens and restarts its economy, businesses are reconnecting with customers, discovering new markets, reimagining how they operate and readjusting to a new reality. There are as many different stories as there are businesses.
Whatever the situation you find your business, yourself and your employees in as you reopen, rest assured help is at your side. As you make critical business decisions, especially regarding your retirement plan and other benefits, start by reaching out to your MassMutual relationship manager. We’re here to hold the door as you reopen your business.
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