With health care costs rising and the
uncertain future of government
retirement options, corporate retirement plans are a large incentive for
employees. For a business owner, determining the specific needs and goals of your
company’s benefits package may seem
overwhelming.
It is important to enlist the help of a professional that is well-versed in the Employee Retirement Income Security Act
(ERISA) and can help identify the specific
needs of your company, says Daniel
Kissinger, vice president and retirement
plan specialist with FirstMerit Bank. Each
company’s plan will differ, so it is necessary to find a professional who will ask the
right questions to find the plan that fits
your needs, he says.
Smart Business spoke with Kissinger
about the benefits of retirement plans and
what business owners should look for in
benefit administrators to receive the best
service possible.
Why have retirement plans become a competitive part of a benefits package?
For the business owner, it is a competitive business world where he or she looks
for the best way to recruit quality employees and retain those who are currently
employed. Benefits packages play a large
role in employee recruitment and retention. There are also tax advantages for
employers who offer retirement plans in
their benefits packages.
Employees are often looking for the best
benefits package when they select an
employer. A good 401(k) plan is important
because it provides employees the ability
to save money on a pretax basis for their
own retirement. With the uncertainty of the
future of social security, it is important for
employers to realize that retirement savings now fall solely in the hands of the
employee and that they should offer benefit plans to help. Offering a retirement plan
helps to increase an individual’s personal
wealth. This shows employees that, as a
business owner, you care about their
future and well-being.
Is a retirement plan a benefit that an employer has to offer to stay competitive?
Employees are currently looking at the
overall package an employer can offer. In
the past, salary was usually the deciding
factor when an employee was selecting an
employer. Changes in the benefits industry
have made it necessary for employees to
search for the most competitive package.
Employers are responding to this
demand accordingly in an attempt to stay
competitive. In the last 10 years, almost all
employers began offering some type of
retirement package. Employees are also
looking to see what their employers will
contribute to their retirement fund. Some
companies are able to match a portion of
what employees contribute, which makes
the package more enticing.
Not all employers are able to match what
employees contribute to their fund. Even if
the employee is the only member contributing to the fund, it is pretax and is
therefore at a cost-saving basis.
What expertise and/or qualities should business owners look for in an administrator?
A business owner should look for administrators who are experts in ERISA. You do
not want a broker who is selling a product.
Rather, one should look for an administrator who is an expert in the retirement
industry and can be contacted directly to
service the needs of your company.
Choosing a full-service provider that can
serve as corporate trustee of the plan is
vital, as it greatly reduces the personal fiduciary responsibility of the business owner.
Depending on the size and location of your
company, a local administrator may be
more advantageous because you have a
better chance of receiving personalized,
high-touch service. Additionally, it is beneficial if the provider does not offer any proprietary mutual funds. Offering strictly
third-party mutual funds allows for better
diversification of investments and gives the
business owner the opportunity to offer
top-performing mutual funds in each of the
various categories.
What role should an administrator play in the
developing of a retirement plan?
An administrator should fill the proactive
consulting function. This means an administrator should look at the needs and goals
of the overall plan and work to redesign
the benefits plan as needed to maintain
those goals. Administrators should also
visit the company and employees to conduct employee education meetings once or
twice a year. General topics are discussed
in these meetings in an attempt to get
employees comfortable with the administrator. Many employers hire administrators
to field employee questions and address
their needs. This helps limit the time and
resources the business owner must devote
to dealing with participant issues. An effective administrator takes the work off of the
business owner’s desk.
DANIEL KISSINGER is vice president and retirement plan specialist with FirstMerit Bank, servicing Lorain, Cuyahoga, Lake,
Geauga and Ashtabula Counties, along with the Toledo region.
Reach him at [email protected] or (216) 694-5697.