401(k) Plan Design for Modern Businesses

In today’s fast-paced business world, where keeping top talent and ensuring employee happiness is the name of the game, thoughtful 401(k) plan design can be your secret weapon. It’s not just about ticking boxes; it’s about helping your employees find a path toward Economic Freedom™, which can boost loyalty and create a stronger workplace culture. In the quest to design a plan that keeps both the company and its employees happy, employers will find that the power of personalization and a strong partner are their best allies.

Silent costs add up

Delayed retirement and undersaving are significant stressors not just for employees, but also carry substantial costs for companies, particularly those managing retirement plans ranging from $2 million to $150 million. With nearly 7 out of 10 pre-retirees expressing that the traditional retirement age doesn’t apply to them, and 41% planning to work in retirement out of necessity, it’s critical to evaluate the financial implications of delayed retirement, undersaving, and work distractions.¹

Delayed retirement doesn’t just impact individual employees; it also presents financial challenges for employers regarding workforce planning and succession management. Additionally, undersaving can lead to increased stress, medical bills, and anxiety among employees, ultimately affecting productivity and morale within the organization.

Cost-effective 401(k) plan design

Tailored plan design metrics offer a strategic approach to mitigating the financial burdens associated with delayed retirement and undersaving. By customizing and aligning 401(k) plans with the needs and goals of employers and employees, companies can realize cost reduction benefits across various dimensions.

• Auto-Features: Soon to be required for all new plans, automatic enrollment and escalation features have become table stakes. These features encourage higher employee participation, spreading plan costs more efficiently over a larger pool of contributors.
• Plan Types: Choosing between traditional and Roth 401(k) options can impact immediate tax deductions versus tax-free withdrawals in retirement, influencing employee and employer tax liabilities.
• Investment Options: Offering an array of investment choices can cater to different risk tolerances and retirement goals, potentially reducing administrative costs associated with managing plan assets.
• Employer Contributions: Structuring matching or profit-sharing contributions strategically can incentivize employee savings while managing overall plan costs effectively.

By carefully tailoring these elements to fit the specific dynamics of their workforce, companies not only enhance the attractiveness of their 401(k) offerings but also optimize cost management strategies that benefit both employees and the organization.

Recruit, reward, and retain

A well-designed 401(k) plan is a valuable tool for recruiting, rewarding, and retaining employees. It not only enhances the company’s overall employee value proposition, it also can play a significant role in attracting top talent. By offering a robust retirement plan, employers can differentiate themselves in a competitive job market, strengthening their brand and solidifying their position as an employer of choice.

Onboarding and employee engagement

Effective 401(k) plan design can contribute to a more streamlined onboarding experience for new hires, setting a positive tone for their employment journey. Employees want to hear from employers outside of open enrollment about their benefits packages so incorporating ongoing education and face time in front of employees can encourage them to enroll in the plan.²

Additionally, by providing employees with the tools and resources needed to plan for their financial future, employers can improve engagement levels and foster a sense of commitment among their workforce. Moreover, a well-structured retirement plan can help alleviate work distractions related to financial concerns, leading to improved employee focus and productivity.

Building loyalty: Vesting schedules

Vesting schedules play a pivotal role in recognizing the dedication and loyalty of long-tenured employees. By structuring vesting schedules that reward employees for their years of service, companies demonstrate their appreciation for the contributions and commitment of their workforce. This not only can reinforce a culture of loyalty and longevity but also helps motivate employees to stay engaged and invested in the company’s success over the long term.

Partner with Mercer Advisors for expertise and guidance

A tailored 401(k) plan designed to meet the evolving needs of employers, workplaces, and employees can yield significant cost reduction, employee satisfaction, and retention benefits. As you embark on enhancing your company’s retirement plan, consider partnering with Mercer Advisors for guidance and support. Together we can create a customized solution that aligns with your business objectives, empowering your workforce to help secure a brighter financial future.

Let’s start the conversation today! Schedule a meeting with Tunia Mycyk to discuss your company’s retirement plan needs and explore how Mercer Advisors can support your journey toward a more prosperous and secure future for your employees.

¹ “Retirement planning is changing to meet the new vision of retirement.” Nationwide. 2024.

² “EBRI/Greenwald Consumer Engagement in Health Care Survey.” EBRI. June 2024.

Mercer Advisors Inc. is a parent company of Mercer Global Advisors Inc. and is not involved with investment services. Mercer Global Advisors Inc. (“Mercer Advisors”) is registered as an investment advisor with the SEC. The firm only transacts business in states where it is properly registered or is excluded or exempted from registration requirements.

All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. Content, research, tools and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. Content, research, tools and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.