Everyone likes to feel special. And what’s more special than your birthday? I share my birthday (March 27) with Cynthia Mueller, one of my coworkers. What I have found is that sharing your birthday is a good thing – after all, there is a much higher likelihood of having cupcakes brought in.
It also allows me to share this blog post with Cynthia Mueller, from our Consulting team. We are going to share some thoughts on retirement plans. Cynthia will address retirement plans in general and I will offer some commentary specifically around Employee Stock Ownership Plans (ESOPs).
Plan design is key
Cynthia – Plan sponsors share in the retirement continuum with their employees by offering a retirement program. Retirement plans that promote retirement readiness are ideal. Offering an employer matching contribution encourages employees to defer more into the plan (employer match is better than birthday cake). Plan sponsors provide a matching contribution because it encourages plan participation and helps their employees better prepare for retirement. Sharing is caring. Both are working towards the same goal; a retirement that’s financially secure. That should make employees feel special. It’s knowing someone is thinking about your future birthdays and wants you to be ready for them.
Jerry– In July I wrote about the importance of plan design in driving successful behaviors.
Nowhere is that likely more important than with an ESOP. The design of program impacts the level of benefits, the cost to the company, and satisfaction rates. The plan should be designed in concert with any other retirement plans sponsored by the company to insure that they are meeting their overall objectives.
Education is an investment, not an expense
Cynthia – I wish there was a required class in college, or even in high school, that teaches the importance of saving for retirement (and saving early). Even when a well-designed retirement plan is offered, it’s not always utilized to its fullest potential. That’s often because it’s not understood. Utilizing an employer matching contribution, automatic enrollment with automatic increases and target-date investment options will be more meaningful to employees if they had knowledge on their purpose and importance. Offering a retirement ready plan design is only part of the success. It’s also important for such design to be utilized and understood. Education can aide in achieving that understanding. We need to share this knowledge.
Jerry – Employers are in a tough spot. They often find themselves making a significant investment in their employees’ retirement through plan contributions. At the same time, employees seem to have limited understanding, and appreciation, for the plans. Education is critical to fill that gap.
The education need is particularly acute for companies with ESOPs. In addition to promoting the retirement benefit, the ESOP can help move to a culture of ownership.
Retirement will be here before you know it
Cynthia – Another birthday means another year closer to retirement. That’s more reason to celebrate. It’s also the time of year when I review my retirement participation, to make sure I’m on track to retire as, and when, I’ve planned. Taking full advantage of my employer’s retirement program helps me have my (birthday) cake and eat it too. It’s hard to think about 30 years into the future. But when it comes to retirement planning, it’s never too soon.
Jerry – I’m a lot closer to retirement than Cynthia is (as she reminds me frequently). As a result, those projections at age 65 are a whole lot more meaningful now than they were 25 years ago. It has become abundantly clear that decisions that I made a quarter of a century ago will directly impact my ability to retire when and how I want. I was fortunate that my employer’s plan design either helped me or encouraged me to save for retirement. I was also guided by some knowledgeable coworkers along the way.
In addition to blogging here, I also tweet regularly about topics of interest to ESOPs. Click to follow me on Twitter – @jlripperger.
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