Latest / Money In Motion with Klaas Financial / Elevating Employee Savings: Basics of Engaging Employer Plans

Transcript

Elevating Employee Savings: Basics of Engaging Employer Plans · Money In Motion with Klaas Financial

0:00
Our tough phone lines. They are open for you here at the station.
0:03
If you've got a question for our retirement planning professionals from Class Financial. All
0:07
I gotta just pick a phone, give us call six SOH eight three two
0:10
one thirteen ten. That's six SOH eight three two one thirteen ten, speaking
0:15
of giving us a call and making a connection with Class Financial. Another way
0:19
to reach them, of course, is calling the office right here in Madison
0:22
six oh eight four four two five six three seven. No charge for that
0:26
initial get to know your appoyment Tech Loss Financial. It will be complementary to
0:30
you again their number six oh eight four four two five six three seven.
0:35
The website COSS Financial dot com that's coss k l aa S Financial dot com
0:41
and joining us is joining us this week. I think I had a problem
0:44
with saying that last week as well. CJ Closs and Forrest Ross. CJ.
0:48
How you doing this morning? I'm doing great? How are you shocking?
0:51
Doing really well? Did I have a prom say joined? I think
0:53
I had that same? I think you did. I did? I think
0:55
you did. I'll work on that during We've got next week off with the
0:58
holiday, but I'll work great to talk with you my friend Forrest, welcome
1:02
back. How have you been? Thank you been doing wonderful. It's great
1:04
to have both of you along. Forest, great to have you back on
1:07
the program. Of course, don't forget if you miss any part of today's
1:11
show, or you want to listen back or share, you can always head
1:14
on over to Clossfinancial dot com. The podcast is available there right online.
1:18
You can also learn more about Coss Financial or separate divisions. You can learn
1:21
more about the team at COSS Financial. Also sign up for the weekly Market
1:26
Pulse newsletter. Again, that all available to you at Clossfinancial dot com.
1:30
That's k l a as Financial dot com. There telephon number six oh eight
1:34
four four two five six three seven, No charge for that initial'll get to
1:37
know you appointment at Colss Financial. It will be complementary to you again their
1:41
number six oh eight four four two five six three seven. Since we've got
1:46
Ross long, I'm guessing we're going to be talking retirement plans. We're gonna
1:48
get to those details in just a moment. But first, before we get
1:51
rolling on this week's conversation, let's take a look back at last week's show.
1:55
Of course, each and every week we do the class quiz question a
1:57
week, and this week will be no exception a chance for you don't want
2:00
a twenty five dollars gift card to read Robin a little bit later on in
2:04
this program. Listen closely. Typically both the question answer to the class quiz
2:07
question the league come up during the program, and looking back at last week's
2:12
show and last week's class quiz question the week, let's take a look at
2:15
what the question and answer from last week's show was. Yeah. First off,
2:20
thanks to everyone for listening each week and for participating in our closs quiz
2:23
question of the week. It's it's kind of a fun little thing we came
2:25
up with a number of years ago to to both drive engagement and to help
2:30
people win some prizes. So last week our question was at what age can
2:38
Americans normally qualify for Medicare coverage? And it was a multiple choice question.
2:43
We said is it age sixty five or sixty seven? The correct answer was
2:49
age sixty five and our winner from last week was Linda of Sox City,
2:53
Wisconsin, So you too can be a winner. Just listen closely this week,
2:59
and at the end of the pro Graham Sean I'll read off our question
3:00
for this week you have a chance to win again a twenty five dollars gift
3:04
card to Red Robin with the Glass Quizqunch League. So this week, I
3:07
know we're going to be talking about some ideas for folks. Maybe you own
3:12
a business, have some employees and of course they want to retire, provide
3:16
retirement benefits for what CJ can we learn today? Yeah, So every week
3:22
our topics on Money in Motion typically are for the benefit of individuals trying to
3:27
plan out their own retirements, and really I should say individuals or families.
3:30
However, we do also realize that some of our listeners own companies and are
3:35
constantly in the throes of either creating or managing a retirement plan for employees that
3:40
hopefully is not only cognizant of cost, but also works to incentivize the employees
3:46
that you employ to stay with your company for many years. So with us
3:52
today, as you already heard, is Forrest Ross. He is our director
3:54
of retirement Plans, and so Forest is going to kind of go through some
4:00
of the things he's observed over time, some of the critical elements that employers
4:04
should be thinking about in establishing their company sponsored retirement plans or what are known
4:11
as employer sponsored retirement plans. So for us, can you give us a
4:14
starting point for employers who are listening about some important things to make sure they
4:17
have in place for their employees. Yeah, thanks, CJY. And for
4:23
those people that are listening today that are perhaps owners of a company or perhaps
4:27
in leadership positions in a company like controller, HR, director or CFO,
4:33
we understand that you want to reward your employees for their hard work and time
4:40
and talents that they give your company. And a part of that is providing
4:44
them with a competitive benefits package. And a piece of that benefits package is
4:49
usually a four to one K plan. And today I just want to highlight
4:54
a couple of important things for you, as what we call the plan sponsor
5:00
or employer should be thinking about if you want to have a successful retirement plan
5:03
for your employees. And the first thing I want to mention is plan design.
5:09
Plan design is really important, but there's lots of flexibility in plan design.
5:14
And what I'm talking about that what I'm really talking about is when our
5:17
employees eligible for the plan, what type of investment options are available in the
5:24
plan? Is their employer contributions what kind of distribution options are there. Again,
5:30
there's a lot of flexibility around these topics, but it can make a
5:34
big difference in whether people really take advantage of the benefit plan or not,
5:41
depending on how they're structured. For example, auto enrollment is a feature that
5:45
we've seen become very popular just in the last couple of years, and it's
5:48
a really good tool because what the auto enrollment feature does is an employee,
5:56
once they're eligible for the plan, will automatically be rolled in the plan at
6:00
a predetermined contribution rate unless they opt out. So the default is they're going
6:08
to be enrolled in the plan unless the participants opt out. And what we
6:12
see is that makes people get into the plans sooner, participate sooner, and
6:16
also participate at higher rates, which leads to them having a larger balance down
6:21
the road. Another area that I want to talk about here is just the
6:28
cost of a plan. There are costs associated with operating a plan, administrative
6:33
cost, investment costs, and those costs can be paid by the employer er
6:39
or passed along to the employee. Can You have lots of flexibility with how
6:43
those fees are paid, but it's important that plan sponsor employer benchmark those fees
6:50
and expenses from a fiduciary standpoint to make sure that they're reasonable. So compare
6:57
your fees and expenses compared to other plans of similar size, usually ever two
7:01
to three years, again to make sure that those costs are reasonable. But
7:06
also it's interesting that there have been some recent legislation that has allowed for tax
7:14
credits to be available to employers that are either starting new four oh and K
7:19
plans or for employers that add certain features for example at auto enrollment that I
7:25
mentioned earlier. If you have an existing retirement plan today and you add that
7:30
auto enrollment feature, you actually could be eligible for some tax credits for up
7:34
to three years. Wow, that is really good news to hear, really
7:39
great information from Forrest Ross and CJ. Closs, our retirement planning professionals from
7:43
Coss Financial. You can learn more about Class Financial on their website Coss Financial
7:46
dot com. That's k l Aas Financial dot Com. Delphan number for the
7:50
office right here in Madison six eight four four two five six three seven.
7:56
No charge for that initial get to know you appointment at Class Financial. It
8:00
will be complementary to you. Again, they're number six, so eight four,
8:01
four, two, five six three seven. So forrest, if I'm
8:05
an employer, how much should I consider then contributing to the retirement plan.
8:11
Yeah, so this is an important area for employers plan sponsors to really consider
8:15
very carefully. And let me start off by saying you're not required to provide
8:18
an employer contribution. You can set up a four ROH one K plan and
8:22
only have it set up so that employee contributions go into it. However,
8:26
we would say that if you really want to provide a good benefit for your
8:31
employee ease, you should consider some type of employer contribution, and those can
8:35
really take two different primi primary ways it can be implemented. The first one
8:43
is through what we would call a three percent non elective contribution. So with
8:48
that particular provision, an employer is going to make a three percent contribution of
8:54
wages for all eligible employees, and the employees are going to get that contribution,
9:00
whether they make any of their own contributions to the plan or not.
9:05
The other common feature is through what we would call matching formula, and there's
9:09
lots of different matching formulas that you can have in four one K plans these
9:13
days, but The bottom line is that an employee doesn't get the employee er
9:20
contribution unless they put some of their own money into the plan. So,
9:24
for example, a very common matching formula would be one hundred percent of the
9:30
first three percent. So what that means is that if an employee contributes three
9:35
percent of their wages every pay period, then the employer is going to match
9:39
that dollar for dollar with another three percent. But if the employee does not
9:46
contribute, then they're not going to get any of that matching contributions. They
9:50
have to put some of their own money in to get that matching formula.
9:54
Talking this morning with CJ. Kloss and Forrest Ross. They are retirement professionals
9:58
from Class Financial. Of course you can learn more online. Six oh eight
10:01
four four two five six three seven. That's six eight four four two five
10:05
six three seven. No charge for that initial get to know you appointment deck
10:07
Loss Financial. It will be complimentary to you. Again. They're numbers six
10:11
oh eight four four two five six three seven. Join us on the air
10:15
this morning six oh eight three two one thirteen ten. That's six eight three
10:18
two one thirteen ten. We'll get you right on the air with CJ and
10:20
Forrest as money in motion with Class Financial is here for you and CG.
10:24
I know you've got some You've got some questions you want to ask as well,
10:28
don't you see J Yeah, you know, as Forrest was just kind
10:30
of talking through that that prior section. What a lot of employers will hear
10:35
about is well, I've heard if I set up before one K plan,
10:39
you know, there's complications around testing and highly highly compensated employees. And if
10:46
if I really want to benefit some of my salespeople, then I I you
10:50
know, I I they end up getting money back at the end of the
10:52
year. So they've heard these nightmares of the testing that occurs. Not not
10:56
everybody, but some have heard this. And so what Forest was ref and
11:00
seeing there prior is that often these matching formulas or three percent non electives,
11:05
these can fit into what are called safe harbor contribution formulas. And by doing
11:11
by building your plan this way, and when we say building your plan this
11:13
way, building it with the assumption that you are doing this to incentivize people
11:18
to stay with your company and to give them a good benefits package. If
11:24
you build it the right way, then you typically pass the majority of the
11:28
testing automatically. If you don't, then the testing gets challenging because if you
11:35
say, hey, well I just kind of slept together afore when Gabe Bland,
11:37
if you guys want to contribute, you can. The problem can be
11:41
if the wrong people contribute, to the wrong people being the only the highly
11:45
commed, then they do a testing and not everybody can contribute maximums. Sometimes
11:52
you have money going back to people and it becomes a bit of a mess.
11:54
So this is where people like Forest can be a huge benefit to employers
11:58
because he will help you build a plan in the right way, so that
12:03
then number one, you're incentivizing people the right way, but number two,
12:07
you don't end up with a mess at the end of the year when they
12:09
go to do the testing. They call it the ADP testing. But okay,
12:13
there you go. Now I know that for us there's many fiduciary considerations
12:18
as well for employers in the administration of these plans. So what should employers
12:22
know about their fiduciary duties? Yeah, So, as a plan sponsor of
12:28
a four to zeroe K plan, there's really several things that employeers should be
12:31
thinking about from a fiduciary standpoint, and the first one is that as far
12:37
as the investment options that they're offering in the plan, it should be a
12:43
diverse list of different investment choices that participants had to pick from. There should
12:48
be large cap, small cap, international funds, bonds, target date funds.
12:54
Again, participants need to have the ability to build out a diversified portfolio.
13:00
But then also more importantly, the plan sponsor, from a fiduciary standpoint,
13:05
is required to oversee and manage and monitor those investment options and make sure
13:11
that they're performing up to a certain benchmark or standard. And if a fund
13:16
option is not doing what it's supposed to do, then it may be removed
13:20
and replaced with another investment fund option of similar risk or investment category. So
13:28
it's also important that when a plan sponsor is managing and monitoring these investment options,
13:37
that they're doing it from a frame of mind that they're doing it for
13:41
what's the best interest of all employees. They're not just doing it from the
13:46
side of well, this is what's best for us as management or as a
13:50
certain select group of employees. You need to do it's best for all employees
13:56
or all participants of the plan. And next I want to touch on employee
14:01
engagement. You know, as an employer, if you're taking the time and
14:05
effort and energy to provide a four oh one K plan to your employees,
14:11
you really want to make sure that they're appreciating that benefit, taking advantage of
14:16
it, and really engaging in a way that they can hopefully successfully plan for
14:22
their futures. So financial education is really a very important piece of that puzzle,
14:28
and we really believe that the financial advisor is an important part of providing
14:35
that financial education. And that education can be in the form of workshops,
14:41
on site visits where they're meeting one on one with your employees, podcasts,
14:46
videos, a lot of different things can be provided. But it's important that
14:50
the financial advisor is reaching out to your employees and connecting with them no matter
14:56
where they are in their careers, no matter if they're just starting or if
15:00
they're getting close to retiring. It's important that you're able to connect with them
15:03
at any point in their careers and really engaging with them to make sure that
15:09
they can plan for their futures and just really have a successful nest egg built
15:16
up for them when they're ready to retire. Talking this morning with our retirement
15:20
planning professionals from Class Financial, Forest Ross and Cjlass. Again they come to
15:24
us from Class Financial. You can learn more on class financial dot com.
15:26
That's class klaas financial dot com. Great website to learn more about COSS Financial
15:33
the team. They're separate divisions that they can help you or if you're an
15:35
employer, different areas they can help you out. Again, just head on
15:39
over to cossfinancial dot com. Also, while you're there, scroll down find
15:41
a little envelope that says stay current. You can subscribe to the weekly Market
15:45
Pulse newsletter. It's a fantastic weekly email. It's got a link to the
15:48
most recent podcast. Also some data, a little snapshot of what's been going
15:52
on in the markets. Just head on over to classfinancial dot com to sign
15:56
up and subscribe for that. To telephone up for Class Financial six eight four
16:00
four two five six three seven, no charge for the initial gets no you
16:03
appointment Deck loss Financial it will be complementary to you. Again their number six
16:07
oh eight four four two five six three seven, So employer sponsor four oh
16:11
one K how popular? How common are the United States? We're gonna get
16:14
some of those details next as Money in Motion with Coss Financial continues here thirteen
16:18
ten w IBI joined by our retirement planning professionals C J. Closs and Forest
16:26
Ross. Of course, they come to us from Class Financial, the website
16:29
Coss financial dot com that's Coss k l a as Financial dot com and their
16:33
telephone number six so eight four four two five six three seven no charge for
16:37
the initial gets no you appointment deck Loss Financial. It will be complementary to
16:41
you talking this week about employee employer retirement plans and what needs to go into
16:48
them and some of the planning that goes into them and forests. Just before
16:51
the break, we started talking a little bit about about if you're as a
16:56
sponsor of one of these, some of the duties that are that are there.
17:00
What about just kind of the commonality of these these employers sponsored for oh
17:03
one k plans in the United States, How common are they and what do
17:07
we need to know when it comes to changes you know, secure two point
17:12
zero that act I know changed a lot of things. Does have an effect
17:15
on your retirement space plan, your plan pay retirement space excuse me, yeah,
17:21
thanks, Jean. So to answer the first question, right now,
17:23
in the United States, about four in ten workers have access to a four
17:29
to oh one K plan through their employer, and it's interesting that really industry
17:33
people would say that's not high enough. We need to work to get that
17:37
number higher. That's why you're seeing some legislation passed in and these tax credits
17:42
to encourage employers to actually provide more of these plans to employees. And it's
17:48
interesting that some states are actually mandating that employers provide retirement plans to their employees.
17:55
For example, Illinois, just to ourself, they have a state mandate
17:59
that says that if you're a company that has more than five employees and you've
18:03
been in business for two or more years, that you either have to provide
18:08
your own company retirement plan or you have to opt into the state plan.
18:14
So we're seeing more and more of these about twelve states right now have those
18:17
type of requirements. So it's important that we start making it available to more
18:22
and more people. Even in terms of the answer to the second question,
18:26
there have been a couple of different legislative packages that have passed in the recent
18:30
years. One is Secure Act and then the other one is Secure Act two
18:34
point zero, which was passed in December of twenty twenty two, and through
18:40
these two different legislative packages. There are over ninety provisions in them that were
18:47
designed to modernize the retirement system, promote additional savings, ease some of the
18:52
administrative burdens with providing these plans. But some of those provisions are required and
19:00
have to be adopted, and some of those provisions are optional and the plan
19:06
sponsor has a choice to either include them in their plan or not. So
19:11
that's why it's important that an employer or plan sponsor have a group of trusted
19:17
professionals that they can lean on, like a third party administrator, record keeper,
19:22
financial advisor, a team that can help them wade through all of these
19:26
choices and help them determine which ones should we implement for the benefit of our
19:32
employees, because really, at the end of the day, ultimately what an
19:37
employer is trying to do is they're trying to provide this important benefit to their
19:41
employees to get them to engage, to think about their futures, set aside
19:47
some money so they can grow a nest egg for their future. Really nice
19:52
thing to offer for employees from their employers, and of course making sure that
19:56
all the steps are being followed properly. Very important stuff as we talk with
20:00
Forrest Ross and CJ. Closs, our retirement planning professionals from COSS Financial.
20:03
The website Coss financial dot com. That's k l a A S Financial dot
20:07
com and their telephone number six so eight four four two five six three seven.
20:11
Want hold on to the telephone number. Coming up the next segment,
20:14
we'll talk a little bit more about employers and maybe looking to reviewer revam retirement
20:19
plans with the details from Forest and CG on that. We'll also do the
20:22
Coss Quiz cluesch League all of that next here on Money in Motion thirteen ten
20:27
WIBA talking with our retirement planning professionals from Class Financial. Join this week by
20:34
CJ. Closs and Forrest Ross. Of course the website for COSS Financial it
20:38
is Cossfinancial dot com. That's k l a A S Financial dot com.
20:42
They're telephone number six oh eight four four two five six three seven. No
20:48
charge for the financial gets to know you appoyment TCH COSS Financial. It will
20:51
be complementary to you again their number six oh eight four four two five six
20:56
three seven. Talking this week about about employee or sponsored plans and some of
21:02
the things when it comes to benefit plans that employers need to know about and
21:06
forrest. If you're an employer looking to review or revamp your retirement plan for
21:10
your employees, how can they find out about your services? Yeah, so
21:14
you could start by either just making a call or email to our office here
21:17
Coss Financial in Fitchburg, or visiting our website is another great way to get
21:22
started. But we have a whole team of people here and a lot of
21:26
tools and resources available that we can help you really review what you currently have
21:32
and decide if there are any things that maybe should be added or changed to
21:36
your plan to make it more successful and beneficial for your employees. Great opportunity
21:41
there as we talk with Forest Ross and CJ. Closs, our retirement planning
21:44
professionals from Class Financial speaking of making contact their telephone number six SO eight four
21:48
four two five six three seven. No charge for the initial gets to know
21:52
your employment at Coss Financial. It will be complimentary to you again the office
21:56
number six SO eight four four two five six three seven. The website class
22:00
financial dot com that's Coss k l Aasfinancial dot com. Great website and great
22:04
resource to learn more about Class Financial and of course as we talk with CJ
22:10
and Forrest. People are reminding, oh yeah, you've got the clausquiz question
22:12
leak absolutely have one this week, chance for you to win a twenty five
22:15
dollars gift card to Red Robin. Works like this. In just a moment,
22:18
I'll ask you the class quiz question the week. You then have thirty
22:21
minutes today's program to call the Class Financial office right here in Madison at six
22:25
oh eight four four two five six three seven. If you are the first
22:27
coarse correct answer, win this week's prize again the twenty five dollars gift card
22:32
to Red Robin. This week's closs quiz question week is this true or false?
22:37
The two most common forms of employer contributions into a four to oh one
22:41
k plan include non a non elective three percent contribution or a matching formula true
22:48
or false. Telephone number six oh eight four four two five six three seven.
22:52
First growth correct answer won the twenty five dollars gift card to Red Robin.
22:56
And don't forget that as Class Financials office number right here in matt us
23:00
In six o eight four four two five six three seven. CJ. Forrest
23:03
always great chatting with both of you guys, enjoy this beautiful day. Thanks
23:07
Sean, thank you having a wonderful day and news comes your way next here
23:10
at thirteen ten WIB eight