Plan administrators may be noticing a lower than expected participation rate in their employee benefit plan. Increasing plan participation is advantageous not only to employees, but also to the plan sponsor for reasons which include:
- Employees that view their employer’s retirement plan as part of their compensation package, along with salary and benefits, are less likely to leave for another company that may offer a higher salary, but no employer match. As a result, costs associated with employee turnover are diminished.
- As participation increases, certain fees related to the operation of the plan will decrease per participant. The added participation will help spread the payment of administrative costs among participants.
- Highly compensated employees are those who earned over $120,000 in 2017 and 2016 or own greater than 5% of the company. An increase in participation rate may translate to a higher deferral amount that they are entitled to make based on ADP and ACP testing.
Samet’s Shawn P. Huxley and James Alexander offer several methods for increasing employee plan participation in the infographic below.