Categories
Practice Management
Use the “Great Resignation” to strengthen your 401(k) practice
John Doyle
Senior Retirement Strategist
KEY TAKEAWAYS
  • A record number of American workers left their jobs in 2021 in what has been called the “Great Resignation.”
  • Plan sponsors may be overlooking the value of their retirement plans as a tool to attract and retain talent.
  • In a tight job market, adding or enhancing a retirement plan may help plan sponsors compete in the race for talent.
     

The “Big Quit.” The “Great Resignation.” The “Great Reshuffle.” Whatever you call it, American workers are walking away from their jobs in record numbers. According to the U.S. Department of Labor, roughly 47 million Americans quit their jobs in 2021, and the trend isn’t slowing down.


One of the top ways companies attract and retain talent is by increasing wages. But in a tight labor market, a decent salary might not be enough. There is, however, one recruitment and retention tool that employers might be overlooking — the 401(k) plan or other retirement plans offered by the employer.


According to data from MetLife and the latest U.S. Chamber of Commerce Small Business Index, the labor shortage may be especially painful to small-business owners as almost half (46%) indicate they are facing a worker shortage. As a retirement plan specialist, you can be an ally to your small-business clients in the race for talent by talking to them about how adding or enhancing a retirement plan may help them better compete.


Ask plan sponsors why they have a plan


Make sure you are aligned with their objectives. Many plan sponsors may not focus on why they have originally offered a plan or its objective. They may consider a retirement plan as table stakes — a must-have to simply get in the game. But since they have already committed to the plan, make sure they understand and position it as a valued commodity that helps attract and retain workers. Helping plan sponsors see the value of the plan will help you deliver the best retirement solution.


With so many people leaving their jobs, plan sponsors need to up their recruiting game to fill vacancies. Fortunately, they can position their retirement benefits as a valuable recruitment and retention tool. Ask your clients to consider these facts:
 

  • With more than half of Americans saying they are concerned about retirement security and their ability to save enough on their own,* 401(k)s are taking on increased importance to employees and candidates.
  • 51% of employees joined their current employer chiefly because it offered a retirement plan, according to a survey from Willis Tower Watson.
  • Just over half (52%) of employers offer a 401(k) plan, but that number falls to 44% among small employers.

Explain to your clients that offering a retirement plan shows they care about employees and their well-being and can help them stand out among employers, which can help with current recruitment and retention issues.


A retirement plan can help with employee turnover


A strong retirement plan can also be a way to potentially safeguard against employees being recruited away by other companies. According to an October 2021 survey from the Society for Human Resources Management (SHRM), 41% of employed workers are actively searching or planning to search for a new job and many cited better benefits among the top reasons. Clients should make sure their retirement plan is all it can be and that they are getting the most out of it.


Plan sponsors can get the most “bang for their buck” from their retirement plan by:
 

  • Promoting the plan with tailored communications.
  • Educating employees about how the company is invested in them and their future through the retirement plan.
  • Making enhancements to the plan to make it even more attractive.

What to do about employee retention and recruitment


Boost the power of the retirement plan with some of these changes that may help attract and retain employees:

  • Highlight the plan in the recruiting process. Encourage clients to talk up their plan in recruitment materials or during interviews.
  • Consider expanding eligibility requirements to include part-time employees and/or waive length-of-service requirements for employees to join the plan.
  • Increase the employer match if financially feasible.
  • Consider providing student loan assistance. Many younger workers are saddled with student debt, making it difficult for them to contribute to a 401(k) plan. A small monthly contribution toward workers’ student debt may be a recruiting incentive and encourage plan participation.

Auto-features can also help boost a retirement plan’s effectiveness. While many plans already have some in place, there are ways to help plan sponsors make better use of them.


Clients need your help


The success of your client’s company is tied directly to the quality of its workforce. With record numbers of people leaving their jobs, now is a great time to talk to clients about reevaluating their retirement plan and using it as a recruitment and retention tool. A strong retirement plan, like a 401(k), is a great way for plan sponsors to show that they value their employees and for you to demonstrate yours.



John Doyle is a senior retirement strategist with 37 years of investment industry experience (as of 12/31/2023). He holds an MBA from the F.W. Olin Graduate School of Business at Babson College and a bachelor’s degree in economics from Georgetown University.


* National Institute of Retirement Security, RETIREMENT INSECURITY 2021 - AMERICANS' VIEWS OF RETIREMENT, February 2021.
† BenefitsPRO, Employer-sponsored retirement plans: HR's new recruiting tool?, June 16, 2021.
 

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.
All Capital Group trademarks mentioned are owned by The Capital Group Companies, Inc., an affiliated company or fund. All other company and product names mentioned are the property of their respective companies.
Use of this website is intended for U.S. residents only. Use of this website and materials is also subject to approval by your home office.
On or around July 1, 2024, American Funds Distributors, Inc. will be renamed Capital Client Group, Inc.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.