5 Ways Plan Sponsors Can Improve Retirement Outcomes for Their Participants

Retirement Plans

By Ed McClure, CFP®, PPC®

Employees are saving for retirement at an increasing rate thanks to initiatives implemented by plan sponsors during the past two decades. Defined contribution sponsors can play an important part in helping their participants save more for retirement—and the measures for doing so can also improve their plan structures and metrics.

As a plan sponsor, you can help your employees pursue their long-term financial goals while also benefiting your business by attracting and retaining high-quality employees. In this article, we’ll explore five ways plan sponsors can improve retirement outcomes for participants.

Provide Financial Education and Resources

Unfortunately, many people in America simply aren’t great when it comes to their finances. Studies vary, but a recent one by Standard & Poor’s found only 57% of U.S. adults are financially literate. In addition, credit card debt is at an all-time high, adding to the stress people feel about money. In short, people need more help and education when it comes to personal finance and their retirement—and that’s how you can help. By offering financial education and resources, plan sponsors can empower their participants with the knowledge and tools necessary to make informed decisions. This can include workshops, webinars, online resources, and personalized consultations with financial professionals. 

Include Target Date Retirement Funds

Target date retirement funds (TDFs) offer a simplified investment option for participants. These funds are designed to adjust their asset allocation over time to become more conservative as the participant approaches retirement. This provides participants with a “set it and forget it” investment option that can help take the guesswork out of retirement investing. Offering this simple yet effective investment strategy can help participants who may feel overwhelmed when looking at dozens or hundreds of investment options.

Optimize Employer Match Contributions

One of the most effective ways to encourage employees to save for retirement is through employer match contributions. By optimizing the match formula, plan sponsors can incentivize employees to save more. While you can increase the amount of match you put into the plan, you don’t necessarily have to do that to optimize your match and incentive contributions. For instance, instead of contributing 100% of the first 3% that an employee contributes, you can instead match 50% of the first 6% that a participant contributes. While the net dollar amount is the same to the plan sponsor, this change can incentivize participants to reach that 6% threshold to receive the full amount of the match. 

Require Annual Re-Enrollment 

Annual re-enrollment is a best practice for retirement plans. Simply stated, annual re-enrollment provides participants with an opportunity to review their investment options and adjust their contributions if necessary. By requiring annual re-enrollment, plan sponsors can encourage participants to stay engaged with their retirement plan, investment strategy, and make informed decisions based on their current financial situation. In addition, this also may lower your risk of liability since participants can review their choices regularly and be more informed about their plan.

Offer Roth Option to Diversify Tax Savings

Adding in the option to allow participants to make Roth contributions can allow for tax diversification in their investment accounts as well as in retirement. While traditional contributions are made with pre-tax dollars and taxed upon withdrawal, Roth contributions are made with after-tax dollars and withdrawals are tax-free. By offering a Roth option, plan sponsors can provide participants the flexibility to choose the type of contributions that best suit their financial situation.

Supporting Your Participants

Plan sponsors can help participants make informed financial decisions and enjoy a better retirement by implementing certain strategies. If you’re a plan sponsor looking to improve your retirement plan, McClure Wealth Management is here to help. Our team is committed to being your financial advocate while helping you explore these strategies in order to support your participants as they pursue their long-term financial goals with confidence. Feel free to contact me at (760) 607-0611 or emailing [email protected] to set up a consultation.

About Ed

Ed McClure is a CERTIFIED FINANCIAL PLANNER™ practitioner, Professional Plan Consultant® (PPC®), and founder of McClure Wealth Management. With over 25 years of experience, Ed works with business owners who want to maximize their retirement plan benefits, businesses that need help setting up and managing a 401(k) for their employees, and families who want guidance while planning their futures. He is known for simplifying complicated and intimidating topics and making wealth management concepts easy for others to remember and understand.  

Ed has established himself as a trusted resource for business owners and individuals, and his mission is to help his clients achieve the financial independence and well-being they deserve so they can give their time and energy to the people and things they love. He has a bachelor’s degree in finance from the University of Illinois. In his spare time, Ed conducts financial workshops for the Just In Time for Foster Youth organization, which helps equip young men and women as they come out of the foster care system. He also loves to travel and spend time with his favorite people. To learn more about Ed, connect with him on LinkedIn.