I’m seeing a major difference between average retirement plans and great ones.
The best plans offer contribution matches and bend over backwards to get people to save. The average and stinker plans do the absolute minimum.
What separates the so-so plans from the stars? These three key features, according to Bradley Bartells, a certified public accountant who works with 401(k) plan administrators:
Immediate eligibility. Why make new employees wait three, six or twelve months to start saving for retirement? Plan sponsors need to let their new employees start saving for retirement from day one.
Allow a Roth contribution option. This is becoming a popular feature for younger employees who are in a low tax bracket and can take a tax hit on retirement savings today, in exchange for tax-free earnings and withdrawals at retirement. Providing a Roth option to your employees today allows you to increase your retirement benefits in the future.
The “Auto” features. Automatic enrollment, automatic deferral escalation, and auto re-enrollment. The fact that these are “automatic” once a plan implements them make them a no-brainer for plan sponsors to include in their 401k plans.
What if your employer doesn’t offer these features? If you’re switching jobs, look for employers who do. If not, approach your human resources department or plan administrator and ask them to add these options. They will make a large difference in terms of increased savings over time.