Adopt new approaches : Holding one-on-one and group employee meetings, offering an attractive employer matching contribution
and implementing automatic features were identified as effective in terms of addressing plan challenges.
Some employers might think that contributing the full employer matching contribution
would be a good start, but that won't cover employee needs in retirement, Eschtruth said.
It also provides comprehensive benefits including an employee savings plan with an employer matching contribution
and flexible work arrangements such as a 35-hour work week and telecommuting options.
A firm has considerable flexibility under a qualified plan to structure the employer matching contribution
To be a qualified automatic enrollment feature, the plan must provide for either an employer matching contribution
or a profit sharing contribution.
In the latter option, the employer contribution is a dollar-for-dollar match of an employee's pre-tax contributions up to 3 percent of compensation and a 50-cent match for each dollar of employee pre-tax contributions between 3 and 5 percent of compensation, for a maximum employer matching contribution
of 4 percent of compensation.
This part of the discussion draws on a recent paper that I co-wrote that discusses the costs and benefits to firms of providing the employer matching contribution
in company stock.
98-22 (which prescribes standard correction methods for plans availing themselves of the streamlined "Standardized VCR Procedure" (SVP) under VCR), the only authorized correction method for the improper exclusion of an employee from an elective 401(k) plan is for the employer to make a contribution to the plan on behalf of the employee equal to the "actual deferral percentage" for the group of either highly or non-highly compensated employees to which the employee belongs and to make additional contributions for any employer matching contribution
or voluntary non-401(k) contributions that the employee could have made, on the same group-average basis.
Data from the 1993 BLS Employee Benefits Survey show that 29 percent of full-time employees in medium and large private establishments participated in a savings and thrift plan with an employer matching contribution
, compared with 13 percent in deferred profit-sharing plans and 8 percent in money purchase plans.
Focus on making saving a simple and achievable goal Through the first two decades of your working life, make every effort to save the maximum allowed by a 401(k) plan, but be sure to at least set aside enough to get the employer matching contribution
An investment in your employer retirement plan may be worth far more in tax savings and could earn you an employer matching contribution
Client data indicates that combining automatic enrollment with an employer matching contribution
helps drive an even better savings rate.