Many employers are looking for benefits to attract and retain talented employees, while increasing their own deductible contributions. The hybrid defined benefit/defined contribution plan may be the answer. Changes to retirement plans in the Pension Protection Act of 2006 make this option very attractive for many small business owners and professional firms.
“Employers that provide DC-only retirement plans recognize they need to increase employee engagement with their plans in order to improve their employees’ retirement readiness. Effective DC retirement plans require that workers understand and take full advantage of them, which is why organizations are moving beyond merely making these benefits available,” says Mike Archer, senior retirement consultant at Towers Watson.Other key findings from the survey include:
• Hybrid plans, primarily cash balance plans that combine features of 401(k) plans and traditional pension plans, are now the most prevalent type of DB plan for new hires. More than half (54%) of DB plans are hybrid plans, while 46% are traditional plans.
• Over three-fourths (78%) of DB plan sponsors for new hires believe employees value the guaranteed benefits from pensions more than other features, compared with only 50% of DC-only sponsors.
• Additionally, 54% of DB sponsors for new hires believe employees value income throughout retirement, while only 28% of DC-only sponsors do. Other Towers Watson research shows a growing number of employees are willing to pay more from each paycheck to ensure a guaranteed retirement benefit.
To attract and retain talented employees, employers will need to offer excellent employee benefits. There are numerous options for employers to improve their retirement plan options.
Please comment or call to discuss what these options are and will they work for your firm.