CFOs know a strong 401(k) plan can be a huge factor in attracting and retaining top talent.
But how can employers tell just how good their plan really is?
One way is to make sure your plan has all of the following features.
6 key features
Every year, independent financial info firm Brightscope analyzes a host of data from employers’ 401(k) plans to come up with a list of the features all of the top plans have in common.
According to this year’s analysis, the most important features offered with the top 401(k) plans are:
- High employer contributions. The top plans match 100% of workers contributions up to the first 6% of their salary.
- Instant eligibility. Many firms are doing away with waiting periods regarding their plan and allowing new hires to contribute right away – even when there are waiting periods for employer contributions.
- Immediate vesting. Like eligibility, top plans are vesting participants in the plan at 100% right away.
- Lower-than-average fees. Although the fees vary greatly depending on the size of the plan, top plans average fees of 1% or less.
- Nearly perfect participation rates. The best 401(k) plans that Brightscope looked at all had employee participation rates of 90% or greater.
A big reason for such high numbers is auto enrollment. Once enrolled, employees tend to stay in the plan. If you haven’t already added the feature, Brightscope suggests you should add auto enrollment if your 401(k)’s participation rate is below 80% of the workforce.
- High employee deferral rates. Getting employees to enroll in a 401(k) is only a small part of the battle; workers need to contribute a decent chunck of their paychecks.
The research found that the best plans have an average employee deferral amount of $12,500 annually.