Business Owners View 401(k)s as Advantageous, Yet Struggle to Communicate Benefits to Employees
Nationwide uncovers half of business owners have difficulties encouraging employees to participate in 401(k) offerings despite being provided resources and tools by their retirement plan provider
It won’t come as a surprise that business owners view 401(k)s as advantageous both for their business and their employees. Yet, despite business owners seeing the advantages of 401(k)s, a gap exists in understanding how to effectively communicate 401(k) benefits to employees, according to a new survey from Nationwide. And with the Bureau of Labor Statistics reporting 71 percent of all U.S. workers have access to retirement benefits (which include defined benefit and defined contribution plans), offering a 401(k) to employees has become necessary in order to competitively attract and retain talent in today’s strong, steady labor market.
Nationwide’s latest research, which surveyed 400 U.S. business owners with 11-500 employees that offer 401(k)s, finds business owners agree 401(k)s offer key benefits including attracting and recruiting top talent (88 percent); tax advantages for both one’s business and employees (88 percent); improving employee retention (86 percent); and employees viewing a 401(k) as a necessary benefit (84 percent).
The survey data also found that although nearly nine in 10 business owners report their retirement plan provider offers tools and resources to them to help encourage employees to participate, over half of business owners (53 percent) still struggle with communicating the benefits and encouraging participation among their employees. This number increases to 60 percent when looking at female business owners and 65 percent for younger business owners (aged 18-34 years old). What’s more, 68 percent of business owners acknowledge it’s their role/responsibility to encourage employees to participate in a 401(k) offering.
“Our latest survey shows employers are struggling to communicate the benefits of a 401(k) and encourage participation among their employees, ultimately putting their business and their employees at a disadvantage,” said Eric Stevenson, president of Nationwide Retirement Plans. “This data illustrates that the industry has an opportunity to help business owners bridge this gap and make a meaningful difference in the retirement security of their employees.”
Overwhelming majority of business owners agree 401(k) benefits outweigh challenges
While 401(k) plans have become a standard of sorts as a retirement benefit, business owners still report the following challenges in offering a 401(k) to employees:
• Financial cost (45 percent)
• Encouraging and managing employee participation (41 percent)
• Administrative headaches (i.e. paperwork for plan administration) (37 percent)
• Lack of knowledge around starting or maintaining a plan (27 percent)
Even with the challenges associated with offering a 401(k), an overwhelming majority of business owners (92 percent) agree that the benefits of offering a 401(k) plan to employees outweigh the challenges. Business owners ages 35-54 years-old are most likely to agree with this perspective, with nearly all in this age group (99 percent) agreeing. Interestingly, over three in 10 business owners aged 55+ years-old say they don’t believe there are any challenges in offering a 401(k) plan.
Opportunity to help business owners encourage participation
In addition, Nationwide’s data shows nearly two-thirds (64 percent) of business owners feel it is their role/responsibility to provide details on the benefits of participating in a plan with employees, as well as share information on how to enroll (62 percent). In order to cut through the jargon and effectively communicate the benefits of participating in a 401(k) with employees, business owners can look to their plan provider and advisor for additional guidance.
“A workplace retirement plan, such as a 401(k), is among the most valuable employment benefits and a top gauge of retirement preparedness,” noted Stevenson. “As such, it’s integral that employers feel equipped to effectively have these conversations with their employees. Talking to a financial advisor is a good first step to not only discuss the resources and benefits available to business owners from plan providers, but to also gain insight into how to thoughtfully distribute this information and material to employees.”
When assessing employee retirement plans, it is important to consider a plan provider that offers a wide range of resources and savings options to business owners and employees, such as Nationwide’s My Interactive Retirement Planner, a personalized, comprehensive financial planning tool that provides participants with a holistic view of their retirement readiness.
Nationwide also provides access to health savings accounts (HSAs) to plan participants*, which allow for pre-tax contributions to pay for qualified health care expenses that insurance doesn’t cover currently or in the future.
Further, Nationwide offers tools to help advisors discuss future costs and expenses with their business owner clients to help ensure they and their employees are on track for retirement, such as Nationwide’s Health Care Cost Assessment. This tool provides a meaningful, personalized cost estimate that helps advisors and clients estimate future medical and long-term care expenses.
To learn more about the 2019 Nationwide 401(k) Business Owners survey, visit here (PDF) and for more information on Nationwide’s retirement plan offerings, visit https://www.nationwide.com/business/employee-benefits/retirement-plans/.
Nationwide commissioned Edelman Intelligence to conduct a 11-question, online survey between August 22-28, 2019, among a sample of 400 U.S. business owners. Business owners are defined as having between 11-500 employees, being 18 years or older, self-reporting as either a sole or partial owner of their business, and offer a 401(k) plan to their employees. The margin of error for this sample was +/- 4.9 percent at the 95 percent confidence level. As a member of CASRO in good standing, Edelman Intelligence conducts all research in accordance with Market Research Standards and Guidelines.
Nationwide, a Fortune 100 company based in Columbus, Ohio, is one of the largest and strongest diversified insurance and financial services organizations in the United States. Nationwide is rated A+ by both A.M. Best and Standard & Poor’s. An industry leader in driving customer-focused innovation, Nationwide provides a full range of insurance and financial services products including auto, business, homeowners, farm and life insurance; public and private sector retirement plans, annuities and mutual funds; excess & surplus, specialty and surety; pet, motorcycle and boat insurance. For more information, visit www.nationwide.com. Follow us on Facebook and Twitter.