Five ways to boost your retirement plan’s ability to help retain employees

1 Promote automatic savings increases

One way to help speed retirement plan progress—and theoretically, boost job satisfaction—is to make saving more money as painless as possible. There are a few ways to achieve this. For instance, you could:

• Encourage employees to set their contributions as a percentage of pay. Then every time they get a raise or bonus, a portion goes toward retirement.
• Offer an automatic increase feature and make it part of a combined auto-enrollment/auto increase package for new participants. Those who agree to have their paycheck deferrals increased by a certain percentage each year tend to stick with their savings plan over the long run. And with each subsequent bump, they get closer to their goal.

2 Optimize your vesting schedule to reward longevity

Immediate, automatic plan enrollment is both a good idea and soon to be mandated by federal law. But plan sponsors continue to have latitude on when participants gain full ownership of employer contributions, also known as the plan vesting period.

Plan sponsors get two levers in setting their vesting period:

Immediate, automatic plan enrollment is both a good idea and soon to be mandated by federal law. But plan sponsors continue to have latitude on when participants gain full ownership of employer contributions, also known as the plan vesting period.

Plan sponsors get two levers in setting their vesting period:

• The amount of time an employee needs to wait before he or she is fully vested in employer contributions, and
• Whether the vesting happens all at once (known as cliff vesting) or gradually over time (graded vesting).

How does vesting support retention? Simple. When employees leave before becoming fully vested, they leave behind part of any matching or other types of employer contributions. This can be either a larger or a smaller incentive to stay, depending on the amount at stake. Stretching out the vesting period could help you boost retention. 

What vesting rates do plans use for matching contributions?

Plans using each rate (%)

Source: "PLANSPONSOR 2023 Defined Contribution Recordkeeping Survey," © 2023 Asset International, Inc., June 2023.

3 Consider a dynamic QDIA—for investment strategies that evolve with participants’ needs

Today, most plan sponsors choose target-date funds (TDFs) as their qualified default investment alternative (QDIA). And it’s true that TDFs are designed to meet the changing needs of participants as they approach retirement.

People’s investment needs, however, tend to get more delicate as they approach and enter preretirement. They may have assets in several accounts. And as time goes on, investing to achieve a targeted retirement income becomes more important.

A dynamic QDIA lets plan sponsors default participants who make no active selection into more than one type of investment, based on consistent criteria. One dynamic QDIA design provides TDFs for new participants up to a certain age (such as age 50) and managed accounts for those who are older. In a twist, participants who continue to ride with a TDF they defaulted into can be moved automatically into the managed account when they cross the age threshold.

Helping participants invest appropriately shows them they’re appreciated, which often leads to more satisfied and loyal employees. Having a dynamic QDIA strategy helps to prove you’re with them for the long haul.

4 Offer expense-based retirement planning

As participants begin to see their account balances grow, they may naturally feel more invested in the plan you’re providing—and their overall employment situation.

One way to help add fuel to this fire is by allowing them to look forward at how their current plan balance, savings behaviors, and total retirement assets are preparing them to meet their projected future expenses. You do just this by making a retirement expense-based measurement available to your participants.

As a whole, participants in John Hancock plans who engage in expense-based planning ² seem on their way to creating adequate retirement income, with average and median expense coverage ratios of 76.2% and 79.0%, respectively.³

Retirement expense coverage by age and overall

The numbers below reflect the average percentage of projected retirement expenses that participants in each group are expected to be able to cover.

For illustrative purposes only. Individual circumstances may vary. The projected retirement income estimates for current John Hancock accounts future contributions, employer contributions (if applicable), and other accounts set aside for retirement; the projected retirement expense estimates based on proprietary algorithms and predictive analytics; and the retirement readiness score/calculation results from a comparison of projected income and projected expenses in retirement are hypothetical, for illustrative purposes only, and do not constitute investment advice. Please review the available calculations and assumptions information for additional details. When calculating your retirement readiness, participants should always consult with their personal financial and legal advisors. Results are not guaranteed and do not represent the current or future performance of any specific account or investment. Due to market fluctuations and other factors, it is possible that investment objectives may not be met. Investing involves risks, and past performance does not guarantee future results. 

5 Open the door to more Roth savings opportunities

As employees progress through their careers, increase their earnings, and build their assets, the promise of tax-free income in retirement can become more and more attractive to them. And this is why beefing up participants’ chances to accumulate Roth savings can be important to your retention strategy.

There are three steps you can consider:

• Make Roth accounts available—and allow roll-ins from other Roth accounts
• Allow in-plan conversions from traditional to Roth accounts
• Open the door to even more Roth savings by allowing after-tax contributions into your plan—and providing support for a technique called backdoor Roth conversions

How many plans offer these features?

"PLANSPONSOR 2023 Defined Contribution Recordkeeping Survey," © 2023 Asset International, Inc., June 2023.

Inspire loyalty with your retirement plan

It doesn’t take a sizable overhaul of your retirement plan design to make it a more compelling reason for tenured participants to stay. Features like auto increase, basic Roth accounts, and basic tools to help improve retirement readiness may be readily available to you.

Other enhancements—such as a dynamic QDIA, expense-based planning, and support for backdoor Roth conversions—may call for some formal consulting and a resource search. And of course, you’ll need to apply due diligence to structural changes like a new vesting schedule. But if you’re determined to keep your best talent in today’s continually tight labor market, improving your plan’s long-term appeal can help make a difference.

1 The monthly federal unemployment rate ranged from 3.4% to 3.9% from February 2022 to February 2024 according to the U.S. Bureau of Labor Statistics. 2 All John Hancock DC plan participants are eligible for retirement expense projections, which call for verification of some basic information such as earnings and expected state of residence in retirement. The numbers are based on a study of participants on our open-architecture recordkeeping platform who activated their expense projections between 6/30/22 and 6/30/23. 3 Data is from our open-architecture platform. 2022 data reflects John Hancock Retirement Plan Services LLC’s 1,756 plans, 1,440,374 participants, and $95,176,036,431 in assets under management and administration (AUMA) as of 6/30/22. 2023 data reflects John Hancock Retirement Plan Services LLC’s 1,966 plans, 1,511,835 participants, and $100,319,359,778 in AUMA as of 6/30/23.