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Warning: 401K Plans May Cause Employee Appreciation
Companies that offer 401K plans to employees used to be a dime a dozen. Now, with the downturn in the employment market and the general economy, companies that offer 401K plans can be particularly attractive to job seekers.
Companies that sponsor 401K plans stand out today more than ever. With a cogent strategy that takes into account workers desires to invest in their financial future, offering a 401K plan can still make plenty of sense for employers.
401K Plan Vesting Protects Employers
Vesting is the employers protection on the 401K investment. Namely, the ability of an employee to build up a 401K plan on the job is dependent upon the commitment of the employee to the company. Vesting typically means that employees must work for a company for a set period of time before they are entitled to matching funds.
Any 401K plan worth its salt addresses the fundamental issue of when 401K plan proceeds should become available to employees. Especially if the company has been matching employee contributions, it is wise to make the details of the benefits and the vesting plan clear to employees.
The most common way to write a 401K vesting policy is to set some standard timelines, but its also smart in todays job market to think about rewarding project completion. For example, if a certain employee has been brought in to revamp, say, the finance department, a 401K vesting timeline that respects project completion might be more appropriate.
Marketing a 401K Plan to Employees
Once a proper vesting strategy is devised, it is time to think about how the 401K plan is presented to employees. Luckily, selling employees on the benefits of a 401K plan has gotten tremendously easier since fewer companies are offering 401K plans to employees.
Marketing the benefits of a 401K plan to employees is well worth the paper work, education resources, and energy to ensure that employees understand and appreciate their 401K account. With good employees, that message gets through--and attracting and keeping good employees are the reasons for a 401K plan to begin with.
In the future, as more Americans approach retirement, employee appreciation for 401K plans appears likely to increase for a sizeable portion of skilled workers.
401K Plans Are Perpetually On Sale
Mutual fund companies love 401K plans because they represent a constant source of automatic new investment. That means companies looking for 401K plans usually have lots of options.
Unlike health benefits, 401K plans represent relatively little risk for the mutual fund managers. Employers are likewise not responsible for the vast majority of 401K problems. However, all the risk is not being passed along to employees. A companys 401K plan does not need to be made up of only stocks, with all the volatility that comes along with the stock market. Employees can put their 401K funds into FDIC-insured deposit accounts, such as CDs or money market accounts.
Many 401K companies will help employers convey these important messages to employees, ensuring maximum benefit to employers and employees alike.