After attending a recent conference and thinking about the company culture we’re striving to build at Shepherd Financial, this quote from Richard Branson kept running through my head:
‘Clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients.’
It’s true. All the things we’re passionate about here (for our clients!) – creating financially healthy individuals, retirement-ready participants, and responsible plan fiduciaries – happen when we take care of our team first. While we are a young company, our growth has been rapid, and keeping this conversation about culture in the front of our minds is essential to our continued success.
Our leadership team at Shepherd has used the following questions to help guide our planning process. As you craft your own benefits package and design the structure of your retirement plan, consider asking yourself these same questions.
What is your company identity?
In other words: who are you? How did you get here? Why are you doing what you’re doing? If you can clearly articulate the answers to these questions, logical decisions about how to care for your team will follow.
What is the tie-in?
Benefits for your employees should align with what you’re trying to accomplish as a company. Consider your environment and what’s appropriate for your team – from a financial perspective, think about what you can afford, both right now and in the future. If your desire is to offer a more robust package over time, share that vision with your team.
Why do these benefits matter?
When selecting plan specifications (automatic features, vesting schedule, etc.), consider how they will be used to both recruit and retain your employees. Do your benefits meet the practical needs of the people you’ve hired? Are you putting your team members in a position to retire well? Is their hard work going to pay off in the future? How are you financially sharing corporate success with each person?
Ultimately, your retirement plan and benefits package need to reflect how you want to be seen by your employees and the community. Don’t segment your decisions – instead, consider how they impact the whole landscape of your employees’ lives. This process won’t happen overnight, but if you’re not deliberate, it won’t happen at all. Remember who comes first, and act accordingly.
The concept of corporate social responsibility (CSR) has been making waves, urging corporations to be – as you may have guessed – socially responsible. In other words, deliberately conducting business in a way that creates a positive impact in the community, environment, and society. The goals of CSR include the following:
- Developing innovative practices that create sustainability and minimize our carbon footprint
- Implementing fair and ethical practices with regard to our products, employees, and clients
- Caring for others through our philanthropic efforts, whether a donation of money, products, or services
As both consumers and prospective employees more highly prioritize the CSR of the businesses they choose, corporations would do well to develop relevant policies for their teams. However, CSR established merely as a public relations ploy will lack the heart needed to make a legitimate impact in the world.
But employees long to be engaged with things that matter; even smaller companies can begin to integrate CSR tenets within their culture. (Key to the conversation? A firm understanding of and commitment to the general purpose and values of the company itself.) Focus on making this concept of giving back, which can encompass all the goals of CSR, a regular part of conversations with your team.
For greater employee buy-in, ask individuals to identify businesses, causes, and projects that align with their personal interests. Highlight the importance of CSR by clearly communicating its value to your company. As an example, at Shepherd Financial, we have committed to serving together as a team every quarter, and our employees are provided with two paid days each year to volunteer where they choose.
While we are providing a benefit to someone else, these team service projects have also been a gift to us. We are able to step away from a fast-paced, demanding schedule, spend time together, and realign our priorities. Top of the list? Helping people. And whether it is through a service project, creating a plan to eliminate debt, or helping successfully usher someone into retirement, we know that genuine relationships matter. So we continue to emphasize the importance of investing in others and giving back.
Do we have room to grow in our CSR efforts? Absolutely. And we’re dedicated to continuously looking for ways we can help people, strengthen relationships, and positively impact our world.
Every group has its own lingo. When football coaches speak about designing receiver slants, hitting the A-gap, or running stunts, players quickly understand their roles. Likewise, as theater buffs converse about moving stage left, blocking, and striking, no one bats an eye. But if you’re not part of either group, it might just sound like gibberish.
The retirement industry has this problem, too. Advisors and plan sponsors use technically-correct language to describe company plans, features, and savings strategies, but the jargon is causing a disconnect. Research has revealed participants find their retirement plans to be confusing; their desire for clearer language should be a loud call for our attention. If they don’t understand their options, participants may be less likely to make appropriate decisions about their retirement plan account.
As mentioned in previous posts, different generations desire different benefits options, but they also have unique communication needs. This is true for not only how we communicate but what we communicate. A baby boomer may be looking for financial advice, while a millennial might prefer a financial coach or financial counseling.
Plan enrollment is a critical time to help employees see the big picture. Defined contribution is a somewhat clunky term – employees can be encouraged to participate in their workplace savings plan. And instead of talking about a deferral rate, employees might better understand phrases like the amount you contribute or the percentage of your paycheck that you put in the plan.
The employer match is also a point of confusion, but clarification is critical for increasing participants’ savings rates. Telling participants about free money and the ability to significantly increase their total amount of retirement savings resonates with their goals.1 After defining the company match, it’s important to explain how that money is vested – but very few employees have any idea what a vesting schedule is. They might, however, be very interested to hear about the rate of ownership for that free money.
Finally, it’s easy to quickly get in the weeds when it comes to investment terminology. Target date funds are the victims of plenty of industry jargon. A helpful explanation about their intent may include language about a customized strategy that is managed for you and designed to help achieve your goals.1 Talking about a glide path may illicit blank stares, while a risk-reduction path1 over the course of working years is easier to understand.
Ultimately, no language choice will be the perfect fit for all employees, but it remains essential for advisors to prioritize speaking in more understandable and relatable terms.
As discussed in last month’s blog, employers must rethink the formation of corporate benefits packages to better attract and retain high-quality employees. The key point was creating a benefits package with different and refreshed options (or even deconstructing it to allow for greater choice and flexibility), but an equally important piece of the puzzle is effectively communicating with employees.
Remember, multiple generations make up the modern workforce, and it’s important to understand their different communication needs. Regardless of their generation, each employee may have unique preferences; these should be attuned to and included as the benefits package is created, announced, and implemented.
While the retirement plan is one slice of the holistic benefits package, it comes with its own set of challenges. For example, employee enrollment and deferral eligibility may be different than eligibility to receive employer contributions. An 18-year-old employee just starting their first job may not understand any of those terms, while a 60-year-old transitioning to a new employer might be full of questions about rollovers, in-service distributions, and more.
Will these employees learn best at a group meeting? With customized resource sheets? Working with a financial advisor in a one-on-one setting? Watching a pre-recorded, customized enrollment video? Don’t limit the possibilities, because the answer is likely a combination of several of these options; each generation will desire a range of communication channels. Technology offers more, too – consider email, text messaging, company intranet, webinars, online tools, social media, and apps. Some employees may be content with one-time efforts; others will desire constant engagement and more frequent messaging.
While carrying different expectations for relationships with their employers, commonalities abound among the generations. Employees want fair treatment, to be acknowledged for a job well done, and trust they are working in the right place. Paying attention to these desires, as well as incorporating a flexible benefits package with a healthy variety of communication channels, is ultimately a win for everyone.
Employees really do want to understand their benefits, and as an employer, it is your responsibility to effectively communicate with them. If your current methods aren’t measuring up, call the Shepherd Financial team. We’re here to help.
Attracting and retaining high quality employees is not a new challenge, but the benefits landscape has changed dramatically in recent years, particularly since millennials entered the workforce. And now that this generation is today’s largest workforce demographic (hint: it’s your employees who are anywhere from 23 to 38 right now), employers must rethink the construction of the overall benefits package. As you consider how to add value for employees and help your company grow, do you understand what millennials actually want?
The answer is twofold: different options than previous generations required, and the ability to create a customized benefits experience.
Don’t bristle at these desires – especially because of technology, today’s workplace is fundamentally different than it was 20 years ago. It makes sense your employees have new expectations, too. (Speaking of technology, it should be standard to have always-accessible employee benefit information, often through a secure online portal.)
Aside from health insurance and retirement plans, benefit options might include the ability to work remotely, flexibility in work schedules, student loan repayment plans, opportunities for professional development, lifestyle solutions like onsite child care, and corporate investment in wellness initiatives. While some of these options require creative thinking and scheduling, the positive results speak for themselves in overall employee wellbeing and productivity.
Regarding the customized benefits experience, it is becoming increasingly popular – and practical – to offer an à la carte solution. In short, employees receive a fixed amount of money as part of the benefits offering and may decide how to allocate their employer’s contribution. Closer to retirement, a baby boomer might select a higher contribution rate to the company retirement plan and a full suite of health insurance, life insurance, and long-term care insurance; a millennial employee may earmark less money for their retirement plan but include student loan repayment and extra parental leave.
Every company is unique, and so are your employees. Employers certainly have many decisions to make about the options to include, as well as how to structure the benefits program to meet compliance regulations. To discuss ways to better attract and retain employees through the benefits program, call the Shepherd Financial team.
Did the recent 35-day partial government shutdown affect you or someone you know? It’s quite possible, considering it forced 800,000 federal workers to miss paychecks and hurt many small businesses. And since the three-week spending bill expires soon, there could be even more financial repercussions.
These recent circumstances certainly give reason to pause and wonder: are you prepared for a financial shutdown in your life? If that question feels too broad, what about this one: if you were in a serious accident and had to miss work, how long would your current financial situation carry you? 35 days? 6 months?
This is about more than just creating an emergency fund – though you should, since it’s widely touted 40% of Americans can’t cover a $400 emergency. And it’s not just about having proper insurance coverage, though that’s certainly important, too. The bigger issue is thoughtfully creating a financial plan and knowing where to turn if the bottom falls out.
As a plan sponsor, you might feel the pieces in your plan are well-aligned. That’s positive news! But can the same be said for your employees? If they can’t currently address a $400 bill, how would they handle a total shutdown if it occurred? You can help prepare your team by proactively providing education and wellness opportunities, offering useful resources that speak to real situations, and taking the fear out of financial conversations.
Employees don’t get off the hook that easily, though – everyone is ultimately responsible for themselves. Consider the last time you gave yourself a financial checkup. Start with a budget you’ll actually follow, build up your emergency fund, and pay off debt. Then push deeper – ask for help to balance college funding, utilize a health savings account, max out your retirement account options, and optimize tax strategies.
The Shepherd Financial team is always only a phone call away. Whether you’re currently in a financial crisis or want to create a plan to see you through one, we want to help.
A special year-end note from Leah, partner and Director of Retirement Plan Services at Shepherd Financial:
I should preface this by saying I am not at all a blogger – my degree is in Mathematics, so I don’t claim to have a way with words. But I am obsessed with people who do – my newsfeed is full of great writers talking about the things I love – like food, fashion, and Notre Dame football, just to name a few! So I hope I do the blogging world justice with this post, because I have something important to say.
Our industry moves fast, and our team at Shepherd is constantly running at breakneck speed to stay ahead of the curve. It seems as if each year goes faster than the one before, and December feels like it’s gone as soon as it starts – between work deadlines, holiday parties, and a million errands, I often find my head spinning. Don’t get me wrong – it’s a joyful time, full of celebrations and things to be happy about. But because of our frenetic pace, I sometimes have to force myself to pause and reflect on the past year.
And when I do, I am just in awe. 2018 was a really big year, both personally and professionally. I have some wonderful trophies to remember the year by – I was published and made partner – and I am so grateful for them! But the biggest accomplishments, in my mind, are the relationships I have built or deepened this year.
I have been here since the beginning and gotten to see Shepherd Financial grow right in front of my eyes. We still have a long way to go and are always trying to innovate, but we are doing so many things well. The level of service we are able to offer to our clients has increased exponentially. The success stories we hear from helping plan sponsors and participants show we’re making positive contributions, and I’m so proud to be part of those experiences.
This was a pivotal year for our team – we adopted a new branch and have experienced the growing pains that come along with opening our arms to more people. We are still in process as we figure out how to improve, learn, and grow together. While we have good and bad days, I believe we will ultimately come out better than before.
And that’s largely due to the fact that I am blessed to be surrounded by really good and extremely talented people. The makeup of our team is so unique, and I am consistently impressed by each person. I believe I am part of a truly special group, and if we’ve come this far in four years, there’s no telling what we can accomplish in the future. In the grand scheme of things, we’re really only in the beginning of our story.
So from the bottom of my heart, whether you are a client, service partner, or one of my team members, thank you for sharing in this with me. I’m in awe and so, so grateful.
If you’ve been around the past few months, you’ve probably seen that health savings accounts (HSAs) are all the buzz in the retirement industry. But what’s the fuss?
Well, a major fear for adults is that they’re going to run out of money to pay for health care or long-term care as they age. Studies estimate the average 65-year-old retired couple is going to need between $250,000 and $300,000 for out-of-pocket health care expenses, though some reports push those numbers over $400,000. Regardless, it’s an intimidating number, especially for employees already struggling to save for retirement.
So how can HSAs help? These tax-advantaged medical savings accounts were created in 2003 as part of the Medicare Modernization Act to provide Americans with more knowledge about and more control over their health care spending. HSAs are designed to help people save money for current and future qualified expenses.
An HSA can be a very effective companion to a 401(k) plan when preparing for retirement. And for certain employees, after qualifying for their employer’s matching contribution in the 401(k) plan, it could make sense to max out their HSA contributions. There are three primary tax advantages:
- Like a 401(k) account, employees can make pre-tax contributions, lowering their taxable income. Employers can also contribute to the account, either in a lump sum or with each paycheck.
- The money grows tax-free and, depending on the HSA’s features, can be invested for greater growth potential.
- As long as the money is used for qualified healthcare expenses, withdrawals and any investment gains are 100% tax-free. (If money is withdrawn before age 65 for any reason other than paying qualified medical expenses, there is a 20% IRS penalty, and the funds are considered taxable income.)
An HSA’s positive features don’t end with the triple tax savings – they’re individually owned and portable, which means employees have control of their accounts and can transport them from job to job. Unlike a flexible spending arrangement (FSA), HSA money isn’t forfeited at year-end.
Though there are contribution limits, HSAs allow more than just the account owner to contribute, because after-tax contributions are also permitted (and if made by the account owner, these contributions can also then be deducted on personal taxes). Additionally, individuals age 55 or older can make catch-up contributions.
Employees can easily miss out on an HSA’s advantages if they are not properly educated about its features. The Shepherd Financial team is equipped to help your participants better understand their whole suite of benefits; call us today to schedule an HSA-focused employee engagement meeting!
None of the information in this document should be considered as tax advice. You should consult your tax advisor for information concerning your individual situation.
Are you a procrastinator? Do you get a rush from delaying things until their final deadlines? You’re certainly not alone. Many people will sheepishly admit to sometimes pushing work to the last minute. But it could be a problem if you’re part of the 20% of the population known as chronic procrastinators, whose delays create havoc and undermine goals in multiple areas of their lives.
At the halfway point of 2018, we have to ask: where do you fall on the spectrum? And is your procrastination affecting others? As a plan sponsor, it’s your fiduciary duty to prioritize your company’s retirement plan and participants. So those financial wellness goals you set in January? Pretty important. The pending decisions about plan design? Critical and time sensitive.
First, remind yourself of the priority items for this year. If this was never a discussion with your advisor, schedule a review meeting right now. You need to have a clear picture of where you’re going to determine the steps you should be taking along the way. Analyze what adjustments might need to be made to those goals since a great deal of change can occur over the course of six months.
With regard to financial wellness, consider your employee population and anything you’ve learned about them. Do you know their communication preferences? It may be helpful to integrate those attributes and desires in your overall delivery strategy. Examine the type and frequency of participant meetings. Are your employees engaged? Do they have access to appropriate resources? If the answer to either question is no, consider the changes needed to help your employees retire well. You should also think about how you currently measure the success of your financial wellness program – what are your metrics? What results have you seen so far this year?
Perhaps you want to implement a safe harbor contribution provision in your plan design. Well, don’t delay – missing the deadline can be costly. To obtain the safe harbor exemption from ADP and ACP testing for the remainder of the year and ensure an active safe harbor plan by January 1st, the setup process should begin no later than September 15th. Since you must provide notices to your employees at least 30 days (but no more than 90 days) before the beginning of the plan year, notices should be delivered by December 1st.
So even if you’re infamous for your procrastinating ways, here’s your gentle reminder: your deadline is now. Do the things you’ve been delaying – at least when it comes to your company’s retirement plan.
‘I don’t know if you’ve been watching the news lately, but we live in contentious times,’ said [anyone at any given moment in history]. It seems to be the case that putting people near each other is the fastest way to guarantee discord of some kind. In our industry, that can play out in a number of ways; making major headlines these days, though, are lawsuits targeting 401(k) plans.
For the last decade, most of these lawsuits have been aimed at mega plans – those in the multibillion-dollar arena – and their service providers. But the past few years have seen this litigation creep down market and target plan sponsors for their lack of fiduciary prudence. So the question must be asked: as a plan sponsor, do you know how to help reduce the threat of litigation?
First, remember the point of the 401(k) plan is to help employees achieve desired retirement outcomes. In other words, your legal obligation is to ensure your plan’s administration and investment management decisions are in the best interest of the participants. Keeping that in mind, it’s useful to understand potential danger zones.
Inappropriate investment choices – ERISA puts the emphasis on a prudent decision-making and monitoring process in the selection of investments, rather than on the specific funds chosen. Creating an investment policy statement (IPS) is the best way to establish guidelines for making investment-related decisions in a prudent manner, but plan sponsors must be diligent in following its criteria and objectives. Once established, failure to follow an adopted IPS could be considered a demonstration of fiduciary imprudence.
Excessive fees – Again, ERISA requires a careful, prudent process to ensure no more than reasonable fees are paid for necessary services. High fees aren’t inherently bad, but they can become legally problematic if a plan sponsor can’t demonstrate their prudent decision-making. Understanding if fees are reasonable requires a thorough benchmarking process – fund fees should be compared to other funds with similar risk/return and asset class characteristics, and plan fees (recordkeeping, administration, advising, and any other recurring expenses) should be compared to peer plans.
Documentation is an important element here – formally demonstrate the process undertaken to select and regularly monitor investments, review fees charged and services received, and choose which benchmarks were used. Continue to monitor fees over time and consider how changes in the plan have affected those fees. (For example, as plan assets grow over time, the plan may become eligible for a lower cost share class.)
Committee members who both understand and properly execute their fiduciary roles and responsibilities are better equipped to serve their plan participants and avoid litigation. That’s a winning formula for everyone (except the litigation lawyers, I guess).