Written by Steve Scott
· Economic growth and inflation have increased quickly as the economy has reopened over the past few months.
· Reopening trends coupled with substantial government stimulus, has contributed to a unique workforce shortage crisis. Employers are needing to be more creative and thoughtful than ever in attracting and retaining key talent.
· Retirement plans are often one underutilized tool for attracting and keeping top talent. Businesses should be looking at new employee enrollment and roll overs.
The goal of this article is to revisit the role of retirement plans as the market transitions amidst business reopenings. The market has moved from an employer’s hiring market to a workplace shortage crisis very quickly. During this unique economic explosion we find ourselves in, where concepts such as inflation are serious concerns for the first time in decades, can a company’s qualified plan help address the challenge impacting endless employers at this time? Short answer, yes.
Reopening Creates Revenue & Challenges
I have read many articles, including the January 5th Society for Human Resource Management (SHRM) article titled Recruiting is Top Concern in 2021. The theme is clear, we are all very happy to see our economy and lives getting back to a more normal state, but there are unique challenges in getting the bodies needed to support this change. It goes beyond just hiring as well. With the number of jobs out there and competitive market driving up compensation and perks, employers are not only trying to fill empty job recs, but also trying to keep the top talent they have.
First off, I do not think it is political to comment that the unprecedented amount of government stimulus is a variable in this equation. From extended unemployment, to increased unemployment benefits, to stimulus checks, there has been more support for the unemployed that I can recall in my life. It is not my not job to say if this was right, wrong, too little or too much. But as a consultant who touches hundreds upon hundreds of small to mid-size employers, the reality that the need and fear in a workforce with historically high unemployment has not been there.
Secondly, there is a louder and more confident voice by many employees today as work from home solutions during the pandemic may have offered them flexibility not seen before. This is particularly challenging for employers who need people in-person and in some situations dealing with still strict health guidelines. It is a different recruitment reality for the internal (work from home) sales position vs. hiring at a hotel, restaurant or even certain manufacturing or constructions trades. Both have challenges in bringing people on and ensuring those people are productive and engaged, but how you do it and the underlying hurdles are different based on your workplace reality especially as we come out of the pandemic.
Some employers have looked at Mergers & Acquisitions or strategic alliances to address some of these challenges. But others have revisited this new reality by making benefits more compelling. Per the SHRM (Society for Human Resource Management), we know there have been upticks in virtual workforce hiring, even in 2021, and more flexible time benefits. But another tool we are seeing used to create more incentive for the empowered workforce is benefit plans, and specifically 401(k)s.
Retirement Plans Can Be Used to Attract and Retain Workforce
One element that helps this analysis and process is when a good employer is coupled with a good consultant. On a recent conversation RSG had with a small theatre company who barely survived the pandemic in New York City and is now attracting employees back to the theatre, the Secure Act helped bridge the gap. They knew they needed to offer more incentives to hire and bring people back. Using employee surveys and in working with their third party consultants, employee retirement plans surfaced as the most obvious and impactful choice for recruitment. But there was always a cost here that was concerning. We reminded them of some of the tax incentives laid out in the Secure Act, those costs did not go away, but they were mitigated to a point where not only could a plan be offered but perhaps one with some modest company contribution.
Tax Incentives that Make Retirement Plans Affordable to Offer
The Secure Act passed in Congress just before Christmas of 2019. It was intended to be the legislative discussion and update in the retirement plan industry during the year 2020. Then of course the world changed with the Covid-19 pandemic, and most forgot about the Secure Act as it was simply not the focus. But the tax savings for starting new plans and tax incentives for adding on auto-features are still there and in large part were ignored last year as we all tried to survive the crisis. Now new opportunities like these tax incentives and even still being able to create a plan for 2020, assuming employer taxes were extended, as I write this in June, are being pulled into some of these conversations to make the employer analysis more robust and thoughtful.
For those who have plans, yes there are tax incentives to revisit auto-features such as auto-enrollment and auto-escalation. But there are also the obvious low hanging fruit opportunities such as benchmarking, rollover campaigns and financial wellness campaigns.
Steps Every Employer Can Take
I am a small business owner. None of us have the time to examine and explore every aspect of our companies or organizations fluidly. We all prioritize. Well if you are in a massive hiring mode, then 401(k) matters – like it or not. Below are some best practices you can take action on today.
- Perform a thorough review of your plan to assess if the funds, fees and support tools are a competitive advantage that can be highlighted to your staff and hiring managers.
- Revisit tools such as the participant web-site and onboarding experience. Determine if it is user friendly enough and if not, address that – now.
- If you do not have a world class consulting team to help manage the plan and engage participants, then find one. A good consultant will ensure pricing is competitive, have third party data to support the fund lineup, and should have a customized participant engagement campaign that leverages technology and personal interaction.
A simple google search or chat around any collection of small business owners will tell you the hiring challenges during the reopening is real. Numerous studies from the organizations like SHRM have made the importance of a solid 401(k) retirement plan a non-debatable point in the recruitment world. So if recruiting matters, then your plan matters. Leverage that asset by revisiting and ensuring that what you have is a competitive advantage. Or address the reality that now is the time to create a plan in this tax friendly environment.
Where to Start
So what do you do? First ask yourself and your leadership team how important recruiting is for the remainder of 2021. Then ask yourself and the same individuals the questions above regarding the health of your plan. Marrying benefits, such as 401(k), into a more holistic financial wellness workforce environment is more crucial today than it has been in years. So partner with the right people, ask the right questions, and then get hiring… Because America is again, open for business!