Options include:

Matching. Many matching formulas are based on a discretionary employer contribution. If needed, they can be temporarily or permanently discontinued without rewriting the plan documents. To incentivize employees to save more, consider a match structure of 50 percent of the first 8 percent that your employees contribute to their plan. This encourages them to save more, yet the maximum employer commitment is just 4 percent of employees' salaries.
Profit sharing. This allows employees to share in the successes of the company, while giving the business flexibility in how much it contributes, since the amount is discretionary and can be changed each year.
Safe harbor matching. Safe harbor plans are exempt from nondiscrimination testing requirements, an appealing proposition for many small businesses. While a safe harbor plan requires a defined company contribution and immediate vesting, it may avoid penalties and costs associated with testing, making safe harbor matching one of the more popular choices.
Vesting. Selecting the right vesting schedule can help with employee retention and encourage participants to dive right into saving.
Auto-enroll and auto-increase. These have become popular means of encouraging saving, so much so that even state plans are beginning to mandate auto-enroll and auto-increase features. Why? Because while many employees neglect to enroll in their company's benefit plans, it's often due to lack of education or understanding, or simply because they forget. By contrast, when employees are auto-enrolled, they often fail to notice the small post-tax deduction, despite the large impact it can have on their future. Consider starting auto-enroll at an amount that won't have a significant impact on your team's take-home pay, and add the auto-increase feature to bump them up 1 percent per year. Generally, the industry recommends that individuals save 15 percent of their pay to attain a comfortable retirement. Both auto-enroll and auto-escalate have been proven to help them get there.

2. Invest in a successful rollout.

While taking the time to design your retirement plan is important, the way you introduce it to employees is key to its success. Employees often require help understanding their benefits and crave the education and tools to make smart financial choices. Consider an enrollment meeting hosted by your adviser, if you have one, or your recordkeeper, then create the right communication stream to encourage attendance. Talk employees through the benefits of saving, and explain how the company is making it easier for them to do so. Ensure they have ongoing education at their fingertips, as well. Saving starts with enrollment, but it doesn't end there!

Instant Insights /

Getting the Most out of Your Retirement Plan

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