A highly underutilized retention tool: The 401(k)

A rich 401(k) plan can be a tremendous help when it comes to snatching up top talent. And, if it’s structured the right way, a 401(k) can also be invaluable in retaining those top employees.

Here are two ways to turbo charge your 401(k) into a retention tool and hang onto your best and brightest longer.

1. Restructure to retain. The majority of employer 401(k) matches are structured to reward all employees equally – regardless of how long they’ve been with the company.

Why not restructure the match to reward loyal employees and give the rest of the staff something to look forward to? For example, a company can structure its match to give:

• 25 cents on the first 8% of pay to employees who are with the company less than five years
• 50 cents on the first 8% of pay to employees who are with the company between five to 10 years
• 75 cents on the first 8% of pay to those with the company between 10 to 15 years, and
• a dollar-for-dollar match on the first 8% of pay to those with the company longer than 15 years.

2. Show them your lifetime contributions. Employees know you contribute X-percent to their 401(k) each paycheck. But do they understand what that’s really worth? Seeing the actual dollar amount of what you’ve contributed over the life of their account will give them a better sense of their total compensation. Plus, adding lifetime contribution totals to quarterly statements will increase employees’ appreciation for their 401(k) plans.