With the future of Social Security in doubt and company pensions becoming increasingly rare, many employers are taking a more active role in helping workers plan for retirement.
Even smaller companies are implementing savings programs, such as the 401(k). Savings programs allow employees to contribute to their own retirement funds, with some employers offering matching contributions.
Brad Proctor, owner of American Pro Painters of Columbia, has 17 employees, and he has been offering them participation in a company-sponsored 401(k). So far, he said, only five employees have chosen to participate — a rate that Proctor attributes to the high turnover rate in his industry.
Matching is one of the easiest and best ways for a company to encourage employee participation in a company-sponsored retirement plan, said Sean Wilt, district manager for the Northwestern Mutual Financial Network.
Proctor said his company offers employees a 25 percent match, up to $1,200 a year.
Reminding employees often that they can and should begin planning for the future is also important, Wilt said. Many employers allow workers to sign up for benefits “maybe once a year,” he said, and they don’t generally encourage participation.
Some small companies cannot afford the administrative costs associated with a company-sponsored retirement fund like a 401(k), Wilt says. Employees at those companies should consider opening an individual retirement account, or IRA, Wilt said.
When training new employees, Proctor offers them the option of
signing up for the retirement plan after they have been employed for six months.
“Employers are doing their job to provide benefit plans,” Wilt said. “It’s not their responsibility to force the benefit plan on employees.”
Columbia’s largest employer, MU, does not offer any program that matches employees’ contributions, but it does offer a myriad of choices in retirement savings.
In addition to a pension based on age, years of service and average salary for the final five years of employment, MU offers a supplemental retirement plan, 401(a), a tax deferred annuity plan, 403(b), and a deferred compensation plan, 457(b). The three plans are similar because they allow an employee to put money into a fund directly from the paycheck before taxes are assessed. Thus the employee is earning interest on the contributions without having to worry about paying taxes until the money is withdrawn upon retirement.
Mike Paden, associate vice president for benefits for MU, said the university also has several programs to help employees prepare for retirement.
“We have a all-day-long program for our employees several times a year,” Paden said. “We also have a five or six week program with guests who talk about various aspects of retirement planning.”
The programs are offered to all employees, but they seem to be particularly popular with younger employees, many of whom might not understand which type of plan will help them meet their retirement goals. University employees who have not attended a retirement-planning session by age 55 receive an invitation.
Paden said that, because the MU recently offered many of its employees early retirement, the number of people who participate in the university’s various programs is hard to know. However, he said, the response has always been very positive.
“We measure the success of the program in the amount of people participating,” Paden said.