It’s not often the federal government does something that makes your job just a little easier.
But here’s a rare example. President Barack Obama in December 2010 extended the Bush-era tax cuts including a one-year reduction in workers’ Social Security taxes by nearly a third, from 6.2 percent in 2010 to 4.2 percent for 2011. That means your employees are going to keep more of what they earned.
What it means for you is an opportunity to boost your 401(k) participation and to remind employees of the value of their benefits.
We all know how few workers are prepared for retirement. And, a survey released in late 2010 by Aon Hewitt showed only 38 percent of human resources executives are confident that workers are taking accountability for their financial future — down from 43 percent a year earlier. The survey also showed that only 30 percent are confident that employees are sufficiently prepared for retirement, showing no improvement between 2009 and 2010.
Employers need all the help they can get right now to increase their participation in 401(k) plans.
There are several ways the tax cut can benefit 401(k) plan participants. Anthony Agbay, in this article for SHRM, writes that it’s a great opportunity for plan sponsors who have not put automatic enrollment in place to do so — with less impact on your workers’ paychecks.
The tax cuts also give you another excuse to promote your 401(k) plan to those employees who have not signed up yet. And, to encourage those who are enrolled to boost their savings.
This goes back to what we like to remind our clients often — that benefits communication should not be confined to your open enrollment months. Employees need to know what’s happening with their benefits all year long so that they can take full advantage of the programs that will keep them healthy, save them money and help them stay productive.