In this episode, Jamie Nau sits down with Kimberly Moore to talk about a timely issue since it is close to the time for open enrollment and annual enrollment for employees. We will share strategies old and new that can influence your employees enroll into your 401k Plan while highlighting the importance of communication in bridging the gap between the company and its employees to discuss about 401k Plans.
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"You want to allow people to have very specific questions about their situation. Different companies have different needs. (You) Definitely want to get everybody thinking about this. So they're prepared when it's, when it's time." - Kim Moore
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Jamie Nau: Hello, everybody. Welcome to today's podcast. Today, we are talking about a very timely issue. It is close to open enrollment and annual enrollment for employees to get become involved in their 401(k) plan. So we're going to hit on the issue and dive a little bit deeper, and new things we thought of as well. So we're going to talk about how to get employees into your 401(k) plan. So welcome once again, Kim.
Kim Moore: Thanks Jamie, glad to be here. Yeah. I thought this would be a timely topic for a couple of different perspectives. Folks do open enrollment either at the end of the year or at the beginning of the year. They’ll do a lot of meetings ahead of that open enrollment to give everybody time to make their selections. I think a lot of folks tend to focus on your medical benefits. Disability and voluntary benefits being offered, that's where people tend to put their focus. But what we really try to steer people to is this is a good time to focus your employees on their 401(k) as well, because for a couple of reasons, one you're offering a benefit. You should want your employees to participate in it otherwise, why are you offering it? We have a lot of clients and other folks that we talked to that that's one of their complaints. The participation isn't high enough. I'm offering this, I want more people to participate. So not having people do that is a problem. This is a good opportunity to bring it up again, just to get it in front of people. And then there's things you can do. We're going to talk a little bit more about that, trying to engage folks, but it's also a good time. And one of the things I think, folks have seen a lot through the pandemic. To think about just medical benefits isn't probably the best approach because we all know there's deductibles and copays and all that kind of stuff that impacts your financial health. And whether you have insurance or not greatly affects your financial health, which goes into your saving for retirement. It's better to get your employees in a holistic mind frame when they're thinking about even things like their medical benefits, in the selections they're making. Certainly what selections they may choose could impact their take-home pay, which could impact how much can they put in the 401(k). So, have them kind of focus, like I said holistically. That is why we thought this was a timely topic.
Jamie Nau: Yeah, for sure. I definitely think the holistic approach is really good because I think when you're thinking about employees compensation, you want to think about everything that goes into it, right? So you want to think about the 401(k). You want to think about the benefits, you want to think about bonus structure and profit share salary. So I do agree that when you have this conversation might as well as throw everything in there. I can tell you a quick story about one of my CFO clients. Last year they decided, okay, we're doing all these benefits for our employees. They're taking care of some, they're not doing the others. They are probably a 20 to 30 person digital agency and one of the things that employees really wanted were more benefits. You know, they said, you know, profit sharing is great. But I would love for the company to offer a 401(k) with a full match. I'd love to get more of our health insurance paid. So, then when the end of the year came, we talked through what they we going to offer for a 2021? So have that conversation so you are making sure that you are helping employees to enroll into a 401(k). I think we're going to talk about that a little bit as well.
Kim Moore:. You know, the pandemic has changed focus for a lot of people. It just kind of reset everybody. A lot of the reading that I've been doing, even on the medical side, people are valuing healthcare. A lot of folks have had to use it that never had to before. And so they're learning more about all the things that go into your coverage. The deductibles and the copays, and which doctors you can see. How much of this do I have to pay for it? And the same thing with the 401(k). I'm working a lot more with people that maybe they knew about the 401(k) offering but were just like, yeah, I’ll worry about that later. Now they're starting to think longer term. They are thinking more holistically about it all. I think they're thinking a little differently than they used to. So we thought good time for everybody to kind of reset their thinking from a company standpoint and make sure that you're addressing needs. And one of the things I had on the list to talk about, and you kind of brought that up, Jamie, is I think too often company owners or officers, or whoever's making decisions about benefit plans, they think about what is good for the company. Maybe what they're used to, what they liked and maybe what they hear other people are doing. You know, so they're kind of sitting in their office going down a checklist and thinking. One of the best things I think you can do is ask your employees because you may think one thing, but if you go talk to them it might be different. And especially after the pandemic, people’s situations change too. So maybe you had a two household earnings structure that may have changed. For a lot of folks their financial situation has changed drastically. And so maybe before they didn't care about the company health insurance and didn't care about the company 401(k) plan. Now they do.
Jamie Nau: It's very eye-opening. I'll tell you, this is a very successful company and we've been doing a profit sharing plan for the last three years. And I mean, some of these employees were getting $30,000, $40,000 payouts as part of the profit sharing plan each year. And again, the part that I think, the feedback, was it was unpredictable. Like, yeah, it was great to get a $40,000 check in January, but maybe a little bit nicer to get something consistently month to month that you could count on. And so again, it was very simple. We put a lot of work into this profit sharing plan, and we're always excited to cut that check. I always thought that we were like, you know, doing a great job for these employees. And then you survey them and are like, oh actually we just want our 401(k) matched. So it was a very eye-opening experience for both me as a CFO and what I'm advising to my other clients as well as to other company owners. I would definitely recommend communicating. If you're a large company send a survey out to see what people are looking. I think it was very helpful for us.
Kim Moore: I think it's from a company standpoint. I mean, whether it's a survey, it's just a Dropbox kind of thing, just talking to people in the hall, or put together a group. Make sure you know your employee base. So if you've got younger and older folk, or maybe married with children and single, they all may want different things. So make sure you're getting a good diverse group. Put together a task force or a committee or whatever you want to call it and just have those folks do some polling and then come back to you. And even if at the end of the day, they come back and say, we like everything. We really don't want anything different. You have involved them. That makes them understand that you care and you're trying to get them the best overall compensation, as you described, that's best for you and as a total company. Another thing we're hearing out of the pandemic is that we're seeing the trouble in hiring and a lot of folks leaving the workforce. It's called, the great resignation. One of the reasons people are leaving is they don't feel involved. It doesn't have anything to do with compensation or anything else. They just don't feel like the company is recognizing them as an individual and their contribution. This isn't going to completely fix the problem, but it's one way to say you care.
Jamie Nau: We actually recorded a two section podcast on the great resignation with both our HR guys. I think that would be a great episode to add to your channels. Maybe I'll put those two podcasts on there and release those after this. I be good for your
Kim Moore: Yeah, and specifically to 401(k) in talking about communication. There are required communications that have to go out. We talked about these in other podcasts, so I don’t want to spend a whole lot of time on this. There are required disclosures at different times of the year. There are some that are required specifically around certain events like changes you may make to the plan. There’s yearly required disclosures things like a fee disclosure, summary and report. I'm not going to get into a whole bunch of detail on those because we don't have time. I would recommend two things, one double check with your provider because those disclosures are going to come from your provider. So if you use a third-party administrator TPA, maybe you use a kind of bundled provider, like a Fidelity In either case, whoever you're working with on a regular basis, double check with them and make sure that you've got a good list. The list will buried depending on what kind of plan you have and the different provisions. For example if you have a Safe Harbor plan, there's a specific disclosure for that. So, depending on what kind of plan, make sure, you know what disclosures are required and when they need to go out. So make sure you know which disclosures, when they should be sent out, and who's going to do it. Then make sure you're going down the list. I make sure I've gotten on my personal calendar to do in September. The other thing we always like to talk about with required communications is we recommend you set up a specific procedure for new hires and employees that are terminated. When you're interviewing, let the candidate know that you have a 401(k) plan and the provisions. Explain why you like it. What you think is good about. You know, really sell it in the interview. Obviously when you're onboarding, same thing. Always be reminding employees about open enrollment. Don't just send an email and say, here you go. Sign up or don't. It's a good opportunity to sell the plan. Then the same thing when someone leaves. It's good to do an offboarding process in general, but one of the things you should do is if the person is in the 401(k) plan, make sure to get them to leave the plan. That way you don't have to worry about keeping track of them once they're no longer employed. If that's not an option, then you need to set up some other mechanisms so you can make sure you can keep track of them.
Jamie Nau: I think the important thing here is being intentional with your communications. I think as an employee you can tell when someone's going through the motions. You can tell something is a required communication so you are not going to read it. Make sure employees understand it. Let them know about the match.
Kim Moore: Yeah, the match is a big deal. If you offer a match on the 401(k), I always tell people that's free money. I mean it's just sitting there. It would be like your boss coming to you and say, I'm going to give you a raise and you be like, yeah, no. I don't want it. I mean, who would do that? It’s the same kind of thing. I think those communications are there for a reason. The fee disclosure is a good example. It's there to help people understand that there are fees that are deducted from your plan, again, specific to every plan. Here's what they are. It's there to provide information. One of the things that I always try to stress with people is that those communications, whether we're talking those required ones or other ones, they can be very confusing. I think one of the reasons people don't sign up for a 401(k) is, they don't want to admit it, but they don't really understand it. Then they know they are going to have to pick from a list of investments. They are think I don't know. I don't know A for B and I'm afraid if I pick the wrong one I'm going to lose a bunch of money and it's scary. So, they just say, I'll do it later and then they never do it. We've kind of talked about this before, about how people put it off. Really to save for your retirement you need to start early. It's very important. That way it cumulates. So, if you've got an investment advisor, if you don't have one, probably should get one, but go get somebody that understands the investments and can talk to employees. Not the legal language, but in a way to help them understand a bond fund versus an equity fund. I think if you offer that up to folks, it makes it a little less scary and that again shows you care and you're trying to help them. So I think that's another great way to communicate. We talked a little bit about open enrollment at the beginning. I think it's another great opportunity as you're doing your open enrollment meetings to involve your service providers. So if you're using Fidelity or using a TPA, have those people online and available for questions. Give them 5 - 10 minutes of a presentation to talk about the plan. Have the investment advisor on there to talk about the benefits. How if you put aside $5 today that can grow into a thousand dollars in 20 years. Those can be very powerful presentations. So I think involving those folks in the discussions, as often as possible, was really
Jamie Nau: I think if you have eligibility requirements that people are going to become eligible at different times. I think it would be a wise investment of time to have someone from someone inside that understands it enough to answer questions employees. Put time on their calendar so you can ask what investments are you thinking? Can I help you think through it? I think that one-on-one conversation will get a lot more people onboard.
Kim Moore: I've seen it handled a couple of different ways with our clients. They may have quarterly dates. So everybody in a three month period going to be eligible regardless of when they started on a certain date. And they'll talk about all the benefits. As we said it can be confusing on the 401(k) side. I mean, think about somebody signing up for medical benefits for the first time, how confusing that would be. ] I've got all these voluntary benefits, you know, if I'm 20, do I want to take out dental and vision coverage? Do I want to take out a life insurance policy out? It’s different if I'm 50, you know, there's different implications. The best practice is to have regular meetings where you invite in the people that have become eligible for your benefits over a certain period of time. Again, you would determine how that works and give them a chance. Do your sales pitch. At the end of the day, the folks are saying, no, I don't want any of these benefits, or I don't want, you know, these four or whatever, have them sign a form. We recommend that to all our clients, especially for 401(k). That way you can prove you became eligible. You know, I offered you the plan and you declined. If there's ever a question down the road, or you ever need an audit, that's one of the things you are going to be asked for. Do you have these forms? It's a small investment, but it can pay big dividends and shows new employees that you care about them. You want to make sure they understand.
Jamie Nau: Yeah, communication. I know it's word we're talking about a lot here, but I think it’s the biggest thing when it comes to this. Making sure that employee feels okay, that the company cares and is doing everything they can to make sure they understand these benefits because it can be intimidating. I think back to my first 401(k) plan, they could have told me I'd have to give a finger every month and I wouldn't have raised my hand and asked a question about it.
All: Laughing [in audible]
Kim Moore: One other thing I wanted to mention here, I know we're getting near our time here, but making sure that you're checking with your service provider on all disclosures, if you're making any change at all, even if it seems like a very small minor. Make sure there's not a disclosure. If there is, make sure it gets distributed. The other thing I wanted to talk a little bit about, we talked about open enrollment, but with the pandemic, and of course, you know, we've got listeners probably all over the country and people are in different situations now with the pandemic, a lot of people have returned to work and so some businesses are full steam ahead physically in the office. Not all. Some are still virtual or hybrid. One of the things that we like to point out is if you've gone from the physical to either a hundred percent virtual or a split, don't negate all this communication or your open enrollment meetings just because you are not face to face in a physical office. Company communication may need to be different. Virtual can be difficult to communicate. So I think a little bit of planning upfront is necessary to make sure you are reaching everybody. Those are things I think need to be considered as you're getting ready for this time period going into your open enrollment.
Jamie Nau: Yeah, I think that's a great point. If you don't have standard operating procedures around this now's probably the time to document them. Document how you are going to approach things. How often are you having the meetings? Where are the meetings being held? How are we making sure we have attendance? You know, those types of things all should be documented for your own purposes but also for, again, Kim mentioned audit a little bit. You have evidence behind what is happening and that makes the audit much smoother.
Kim Moore: Yeah. The other thing I think for a lot of the bigger companies, they're used to doing these at a certain month of the year. The have scheduled conferences and hand out packets to everybody. People look forward to that. If you're going to do these virtually, how are you going to do all that? So yeah, you have to put some thought into that. That’s why we're bringing this up. Think ahead, try to come up with another way to do it. Maybe send some things to their home. Maybe put on some kind of a virtual fair where you could go into virtual rooms. In one room there's the medical providers. If you've got questions, you can talk specifically to them. If you've got a 401(k) question, go to another room. Um, so that's something you might want to consider if you've got a technically savvy group that can put that together. You want to allow people to ask very specific questions about their situation.
Jamie Nau: Yeah, we recently hired a new HR person to help us with some of this stuff. One of the things that I've been spending a lot of time on and I'm sure you have too Kim with your employees is, you know, how to make a good first impression with your employees. I want to make new hires first day and month a memorable experience. How can we do that?. To your point you have to be creative. Like what you said with the different virtual rooms. I hadn't heard of that before. That's a cool idea. I've always joked that we should give a joke book to people on their first day. That way they understand our culture. So Kim we are coming up on time. Any final thoughts?
Kim Moore: I don't think so. Just everybody be thinking about this. You have a couple months to get ready. So food for thought here.
Jamie Nau: Great. Thanks for joining Kim.