The way Americans plan and save for retirement has changed dramatically over the past 30 years. Not that long ago, the workforce could count on a company pension to provide them with a stable monthly income as they transitioned into retirement. That practice started to fade away in the 1980s and by the 21st century, very few employers offered a defined benefit program.  

In today’s world, most large employers offer participant-directed 401(k) retirement plans. These retirement programs place the primary responsibility on the employee to save for their retirement. 

Among smaller employers, 401(k) plans generally are not part of the benefits package. This is especially true in the tech sector, where companies are more apt to provide perks like health insurance, stock options, and a flexible working schedule. 

Talent shortages are endemic in the tech sector; competition is fierce for the best candidates. And while prospective hires may be willing to sacrifice some of the perks that large employers offer, employees expect their employers to offer a competitive retirement plan — one that will help them plan, save and invest for their retirement. 

Why offer a 401(k)?

When companies stopped offering pension plans, it created a savings void, especially in the lower and middle classes. Replacing pensions (defined benefit plans) with participant-controlled 401(k)s (defined contribution plans) makes sense in theory — let workers save and invest for retirement themselves, giving them more control over how they build wealth for the future.

However, the reality is, in the absence of the pension safety net, Americans are working well into what was once their “golden years.” Why? There are two main reasons:

1. Employers no longer offer pension plans; or
2. Employers don’t offer a 401(k) program that encourages employees to save and invest for the future.

Although employees perceive a 401(k) plan as a valuable benefit, many employers simply don’t offer one, or if they do, employees don’t receive enough internal support and education to help them maximize the opportunity to save for the future.  

According to the Employee Benefit Research Institute (EBRI), more than half (57%) of Americans have no retirement savings. This translates to a $4.3 billion shortfall in the amount they should have saved. The average life expectancy is 10 years longer than it was in 1960; that means workers should be saving more for retirement, not less. 

Meanwhile, employers who ended their pension programs to save money ended up trading one expense for another — when workers delay their retirement by one year, the cost to the employer is upwards of $50,000 per employee per year.  

Offering a quality 401(k) program provides your employees a fighting chance to accumulate the savings they will need in retirement — and increases the likelihood that they may retire on time. 

Tech employers can support their employees by offering a competitive retirement plan benefit that includes participant education, support, and training. Partnering with knowledgeable providers who deliver a quality, value-add retirement plan experience for both the employer and employee is key. 

The WTIA Tech MEP: An effective solution for growing tech companies

When it comes to choosing what type of 401(k) plan to offer your employees, there are two primary options: single-employer plans, which provide benefits to the employees of one employer, and multiple-employer plans, or MEPs. A MEP is offered by two or more unrelated employers and designed to encourage smaller businesses to share the administrative burden of offering a tax-advantaged retirement savings plan to their employees. Individually, a small company may not be equipped to handle the administrative costs, complexity, liability, and sheer amount of paperwork involved in many plans. Thus, it may be beneficial for an employer to outsource these responsibilities by joining a MEP.

Additional benefits of a MEP include pricing transparency, simplified administration (one audit and a single Form 5500), built-in flexibility, and overall accountability for governance by member company representatives, advisors, and elected board of directors.  MEPs engage service providers to handle the administrative duties and help employers manage the complexities and liabilities that come with any 401(k) plan.

The WTIA Tech MEP includes all of these features and offers a diverse lineup of top-performing fund families, such as Vanguard’s target date series, Oppenheimer, and American Funds. 

Conclusion

A 401(k) is no longer a “nice-to-have” benefit; it’s a must-have for employers who need to compete in recruiting and retaining the best talent. Your company may lack the internal resources to effectively manage and promote a retirement plan for your employees. The WTIA MEP delivers holistic fiduciary and administrative support for employers, along with pricing efficiencies and total transparency that other types of retirement plan offerings may not. In addition, it is run by a dedicated governing board for MEP members that includes participating employers as well as WTIA members, which means members’ best interests are a top priority. For all of these reasons, joining the WTIA MEP is an option worth considering. 

To see if the WTIA tech MEP is a good fit for your company, visit https://www.washingtontechnology.org/services/401k/, or contact John Suk at jsuk@washingtontechnology.org.