4 Tips To A Stronger, More Attractive Retirement Plan

How to leverage your employee retirement plans to engage and retain talent

According to one survey, Canadians will need to save roughly $1 million before they reach retirement age. Yet with many unable to save as much as they would like, 20% of Canadians are concerned they will outlive whatever savings they do have.

Enter: The savvy employer offering a modern retirement package. Not only can retirement plans be used to attract new talent, but they can also support current employees searching for guidance. Those nearing retirement may need direction on how to spend their retirement savings. Younger employees may need incentives to invest in the plan in the first place.

What’s more, employers looking to cut costs to ensure the sustainability of the plan may need to revisit their offerings. Group retirement plans must be regularly monitored and updated to achieve compliance and encourage employee participation.

Follow these best practices to achieve all your goals with your Canadian group retirement plan:

1. Offer tiered contribution design. If you’re looking to increase employee loyalty and retention, a tiered contribution plan can help. 

Many employers have offered to match employee contributions up to a certain amount, such as 5% of salary. In a tiered contribution, employers match employee contributions up to 3% of salary in the first five years but may match contributions up to 4% or 5% in years six through 10 or beyond 10 years.

This increase in matching rewards employees for their loyalty and also encourages them to increase contributions over time. For many employees, this may be an incentive to stick around.

2. Introduce a deferred profit-sharing plan. A deferred profit-sharing plan (DPSP) gives employees the opportunity to share company profits. A DPSP brings many benefits to the table, including
 

• A vesting period of up to two years, encouraging employees to stick with the organization.
• The company recovers 100% of its contribution if the employee leaves before the vesting period is complete.
• Tax savings for the employer, as contributions are paid pre-tax and are tax deductible.
• Employees who leave the company after the vesting period can convert their plan into a RRSP, tax-free, or another investment vehicle.

3. Include target-date funds as an option. Employees like easy options, and target-date funds are one of the simplest to use and understand. Target-date funds mix several types of investments, from stocks and equities to bonds. The asset allocation changes over time to become more conservative and risk-averse.

Usage of target-date funds in Canada has grown from 7% of workplace retirement plans in 2010 to 30% in 2020, and its popularity continues to grow. These funds make it easy for employees to hold a balance of investments to better prepare for the future – without investing a significant amount of time in those investments.

4. Support retirement planning. As earners approach retirement age, the biggest shift is yet to come. Envisioning the retirement years can be a challenge for those who have spent their life working. They may have questions about taxes including
 

• What happens to retirement accounts in retirement?
• How do retirement accounts translate into income that lasts?
• What is most tax efficient?
• How do workplace retirement savings mesh with Canadian Pension Plan and Old Age Security benefits?

Organizations can provide added benefits to their employees by offering educational resources to guide them through their post-working years. These resources may include workshops, webinars, and even simple printed materials that offer support in managing income during retirement.

Shaya Rose is an account executive and production leader for HUB Group Retirement, with nearly 10 years of consulting experience in group retirement plans. Shaya has expertise in cross-border strategies for both Canadian group retirement plans and U.S. 401k plans.  Visit www.hubinternational.com Connect Shaya Rose