“Like fax machines, telephone booths, cassette tapes and typewriters, company-provided employee pension programs have all but been eliminated. Companies are encouraging employees to look at retirement saving programs in different ways.”
Most employees save for their retirement through employee-sponsored retirement plans, with 95% of all organizations offering one or more retirement plans to their employees, according to the article “As pensions are phased out, alternatives are sought,” which appears in DJC Oregon. Pension plans still exist. However, they are shrinking, with only 20% of organizations still offering a traditional defined benefit plan that is open to all employees.
Employers are encouraging their workers to save for retirement, by offering educational resources to help with financial planning. The Society of Human Resource Management (SHRM), a national human resources association, reports that organizations are bringing in retirement experts for group classroom sessions or offering financial advice through online portals.
Many employers offer matching contributions to 401(k) plans, as an added incentive to save. One major employer, Abbot Laboratories, announced a program to help employees save for retirement, while paying off student debt. The employees are eligible for the Freedom to Save program, as long as they are contributing 2% of their eligible pay to student loans through a payroll deduction. The company will match the amount and deposit it into the employees’ 401(k) account without requiring them to make a contribution themselves.
Employers who recognize that their employees spend most of their time at work, can make a difference in the financial literacy and savings habits of their workers. Employers who want to retain the best talent are also willing to offer these kinds of benefits. It becomes a win-win for both the employer and the employee.
A new twist to retirement saving is to encourage retirement saving participation through auto-enrolling employees into plans. Everyone can opt-out and they can change the percentage that is saved. However, the default is to be enrolled.
Some employers take one day and sweep all employees into target-date funds, which are set up as a “set-it-and-forget-it” fund that gets more conservative, as you get older. With this method, employees don’t have to get involved in researching and analyzing their investments or making asset allocations as they age. It’s only done for one day. However, companies do find that many employees decide to leave their funds into those target date funds.
The problem? Companies know that if you are too conservative when starting out, your retirement funds can’t grow as much as is needed. If you take too much risk later in life, your retirement could be at risk.
Reference: DJC Oregon (Sep. 21, 2018) “As pensions are phased out, alternatives are sought”