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Do You Know the Three Rs of a Great 401(k) Plan?

A company 401(k) plan can be a great asset for an employer – with the three Rs resulting when the plan is thoughtfully designed and managed. Consulting with knowledgeable service providers, plan sponsors can construct a plan that will Recruit, Retain and Retire. The beneficiaries will be employer and employee alike.

Most plan sponsors know they need to offer a 401(k) plan that compares well with others in the marketplace in order to attract employees and keep them. Thus, they easily see how the 401(k) plan benefits the company as it seeks to Recruit and Retain. The best plans also define achievement of the third R – the ability to Retire – as a primary goal. Up until now, however, the ability to Retire has been seen primarily as a benefit for employees.

At some companies, things are changing. Employers are realizing there is a good business case to be made for addressing the third R with urgency. Helping employees retire at a normal retirement age isn’t just to the benefit of employees. It can have a positive financial impact on a company’s bottom line.

Employers might ask themselves this question: What is the cost to my company when my employees don’t retire at a normal retirement age? The answer can include the higher salaries or longer leave costs for employees with greater longevity. It might be the increased benefits costs – health care, workers’ comp and disability insurance premiums – that accompany an older workforce.

Plan sponsors have another financial reason to make the ability to Retire a priority. All employees benefit when employers offer a 401(k) plan that is designed to increase participation and savings and provides financial and retirement-planning education. As employees receive direction on preparing for the future and are informed on managing their current finances, their financial confidence increases. Numerous studies have quantified the way in which lower workplace productivity results when employees are distracted by financial worries. A bottom line fact is that financially confident employees are better able to focus on doing their jobs and doing them well.

Offering a 401(k) plan that will Recruit, Retain and Retire can be done by taking a few well-thought-out steps. Look for future blogs to explore steps to take to make your company retirement plan one that benefits both employer and employee.


This blog is written to help make the lives of plan sponsors easier in the process of meeting legal requirements under ERISA for their defined contribution plans. Please understand that reading this blog should not alone take the place of a one-on-one consultation regarding the needs of your specific plan, and hence cannot be a guarantee against fiduciary breaches.

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