How to overcome common retirement plan hurdles
While retirement plans can be a great way to attract and retain employees, many employers (especially small businesses) never get to the point of exploring plan providers due to a few barriers that often get in the way. Luckily, we’ve developed solutions to the most common ones.
Choosing a plan
Finding a solution that works best for your employees can often be a struggle. Defined contribution plans, group RRSPs, and deferred profit sharing plans all have their benefits and drawbacks, but it comes down to the composition of your workforce, administration, and long term objectives. If your objective is to setup an easy to administer plan then a group RRSP may be your best bet. On the other hand, if you are focused on strong employee retention a deferred profit sharing plan can be an incentive for the long-term engagement of your employees.
It’s a common myth that setting up a company retirement plan will take a great deal of time and effort. While some plans can require a bit of workload for administration there are many options that require very little effort on behalf of both employers and employees.
This can be a difficult area to navigate as the fees are often embedded, taken directly off the top from returns or just difficult to find. Your provider should fully disclose both their fees and the fund manager fees for the underlying investments in the portfolio. The fund fees should also be at institutional price levels rather than the retail fund fees that are significantly higher.
Enrollment and Investment decisions
Often, the members of the HR department are not investment experts, yet employees seek their guidance regarding which investment options they should choose when enrolling in the plan. In some instances, HR may feel obligated to help the employees, but investment advice and enrolling in the plan are two separate matters with very different legal implications for the plan sponsor. Crossing the line into helping employees with investment decisions could cause liability issues down the road. The alternative is a retirement plan that eliminates the need for employees to choose their own investments and can thus take this burden off of the HR department.
Offering a group retirement plan can be much simpler than anticipated. Once you get past these common hurdles you’ll be able to offer a plan that can set you apart from many employers and allow you to attract and retain employees.
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