Is a “Cheap” Retirement Plan Costing Your Organization Money?
Make Retirement Plans Part of Your Overall Benefits Strategy
A common adage in the retirement plan community is that if you don’t offer the “lowest-cost” retirement plan, you are putting yourself and your organization at fiduciary risk. While cost is an important consideration, there are many aspects of cost to explore when designing a retirement program. Perhaps the adage guiding our decisions should be: If you think the cost of excellence is expensive, wait until you get the bill for mediocrity.
Consider the Bigger Picture
When evaluating qualified retirement plans, it’s important to look at the associated costs across the organization. The actual administration costs of the plan pale in comparison to the bottom line costs associated with the overall strategy. A typical list of costs should include:
- Impact on other benefit plans (health care and wellness program costs)
- Employer contribution cost (efficiency and motivation caused by program design)
- Staff time associated with operating the plan (time is money)
- Cost assignment (employee vs employer)
- Liability for the organization and owners/trustees
- Plan service provider cost (record keepers, investments, advisors, TPAs)
While the trend in today’s marketplace is for employers to pay the most attention to the final two items listed above (liability and service provider cost) when considering retirement plans, it’s important to expand that focus and acknowledge that the type of retirement plans offered can have a much wider-reaching impact on an organization’s well-being.
Financial Wellness is a Key Component
Personal finances and financial stress have been the leading cause of stress in America for years. That trend was broken in 2017 with financial stress coming in second, affecting 62 percent of Americans. (Political issues came in at #1.)
Financial stress can cause a host of issues in the workplace, including:
- Increased absenteeism
- Higher turnover
- Higher health claims
- Lower productivity
- Lower employee satisfaction
- Employees working beyond normal retirement age
Taking it a step further, individuals exhibiting high levels of stress are 24 percent more costly to insure than individuals with low degrees of stress. Health issues related to stress include, but are not limited to musculoskeletal, respiratory, gastrointestinal, cardiovascular and nervous system.
Leading retirement plan providers understand the bigger picture and focus on the benefits of long-term employee health vs. short-term savings. They offer holistic financial wellness programs centered on key components of personal finance, including budget, debt reduction, credit score, social security, and long-term medical costs.
While organizations may experience higher up-front costs, the benefits that come from offering quality retirement plan options as part of a bigger strategy will likely cost less in the long run and make a greater impact on the overall well-being of the organization.
Contact a M3 Financial Retirement Plan Consultant to learn more.
 American Psychological Association Stress in America Survey 2017
 Higher Health Care Costs for Metabolic Syndrome Risk, Disabled World, September 2009