Plan sponsors are continually looking for ways to boost the benefits of their corporate retirement plan offerings—for their employees, and for their organization. In previous blogs we’ve covered the potential upside to incorporating automated features like auto-enrollment and auto-escalations. In this article we’ll explore how offering immediate eligibility may benefit corporate retirement plans.
While it’s common practice for organizations to maintain a one-year service requirement before allowing employees to contribute to retirement plans, plan sponsors may find it beneficial to consider immediate eligibility for the following reasons:
It can be a positive differentiator for employers.
For companies that do not have a high turnover rate, offering immediate eligibility to employees can be a way to gain a competitive edge, particularly with top-tier talent. The ability to participate right away in an organization’s corporate retirement plan is often a key benefit sought after by executives, and may make a difference in their choice of employers.
In addition to the ability to begin saving with a new employer from the start, immediate eligibility can also allow employees to rollover assets from their previous employer’s plan right away, saving them the hassle of an intermediary step like short-term transition to an IRA account.
It can foster a financially savvy and engaged workforce
Offering employees immediate eligibility means that they have the option to become engaged in the organization’s savings culture right away. Having the chance to invest from the start in a corporate savings plan may lead to a greater feeling of investment in the organization overall, fostering employee loyalty.
Beyond that, offering immediate eligibility, especially if used in tandem with automatic enrollment features, has the potential to build a knowledge base and a habit of saving among employees new to the workforce. For employees who are already in the habit of saving, the option eliminates a potential concern about having to lose or lower their tax deferred savings when taking a new position.
It can be offered to employees without being required for employers
One of the greatest potential benefits of offering immediate eligibility is that organizations have the option to extend it to employees only, and maintain a separate schedule for employer contributions. This can help offset the risk of contributions being forfeit to early turnover.
Wondering if offering immediate eligibility makes sense for your corporate retirement plan? Contact N1 Advisors to discuss the potential benefits of this plan feature for your organization.