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.