Indiana Ranked Top 10 in Retirement Plan Participation

19159583The Pew Trusts recently issued a report showing Indiana has the seventh best participation among employees eligible for employer-sponsored plans of 50 states. Indiana is also in the top twenty in providing access to plans by employers.

Comparatively, Hoosiers are near the top in participation but there is still room to go. In Indiana, 63% of workers have access to an employer-sponsored retirement plan and of these employees, only 57% participate.

Thirty-seven percent of employees in Indiana do not have access to a retirement plan. If you, as an employer, don’t offer a retirement plan, 100% of your employees may have to rely on social security for their sole retirement benefit.

In 2015, the average social security benefit for all retired workers in the United States was $15,936 per year. If the 43% of your employees who are not participating in the retirement plan are planning on being supported solely by social security in retirement, they would be living on less than minimum wage.

If employees cannot retire because of lack of savings and instead continue working, what are the long term costs to employers? Some things to consider might be higher wage costs, higher medical and long term disability costs, to name a few. A recent report from Mercer says, “If 4% of your population is retirement eligible and half of those people choose to delay retirement, 10% of your employee population would experience promotion blockage.” This suggests that for each workers delay in retirement can insight five or more promotion delays.

As Hoosier employers, here is what you can do to improve retirement savings:

  • If you do not have a plan, consider sponsoring a plan.
  • If you do have a plan, encourage participation and realistic savings rates. You can do this by implementing changes in the administration of your plan to automate participation and deferral increases, essentially putting these choices on autopilot for your employees.

Great job, Indiana on being one of the leaders in the country with retirement plan participation. Now is the time to get to work on helping more employees save for retirement. – Indiana a State that Works.

Douglas G. Prince is CEO and a principal at ProCourse Fiduciary Advisors, LLC.

Protecting the 401(k) Plan Sponsor

Money safety concept

According to Groom Law Group, since 2007 there have been nearly 40 lawsuits about fees and expenses paid by employees in 401(k) plans. Of the 40 fee and expense lawsuits filed since 2007, a few have actually been adjudicated through the courts, some have been dismissed and several have been settled out of court. For the lawsuits that have been settled or adjudicated, the amounts have been in the tens of millions, not to mention the legal fees that are incurred.

What should companies do?

Below are items that we believe are prudent processes that plan sponsors should follow:

  1. There should be a clear governance structure that delineates who appoints retirement plan committee members and also a process to monitor the plan’s fiduciary committee.
  2. Fiduciaries should look, at least annually, for lower cost investment options for the plan. The same investment option may have several ways it can charge fees which come with different requirements that can change over time. This makes the process of conducting a regular review so very important.
  3. A review of service providers on a regular basis helps keep costs and services in line with industry changes.
    a. Service provider fees should be benchmarked on a regular basis.
    b. Requests for Proposals should be conducted at least every five years to make sure that fees and services are in line with industry standards.
    c. Service providers should be skilled and have adequate experience in providing the needed services.
    d. Service providers would include (but are not limited to) record keepers, advisors, trustees, custodians, and plan auditors.
  4. A regular review of the investment options and categories offered to participants should be conducted.

A 401(k) plan is a great vehicle to help employees prepare for retirement and, for most employees, it is one of the only vehicles available to them (other than social security). In my opinion, the 401(k) is one of the most successful wealth accumulation vehicles created in history. Americans have accumulated trillions of dollars toward retirement simply by taking money from their paychecks on a regular basis and putting it away for their retirement years.

Douglas G. Prince is CEO and a principal at ProCourse Fiduciary Advisors, LLC.