Whether your state has a mandated retirement savings program or not, don’t be fooled—they’re coming.
In California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, New York, Oregon, Vermont and Washington, employers are already subject to a state-facilitated retirement savings plan. And if your state is not on the that list, it’s likely that a state-mandated plan is currently being discussed in your state’s legislature. Either way, though, this creates an opportunity.
How can you “market through” this and grow your business? Glad you asked!
Start with a Targeted List
It’s easy to find businesses that offer a 401(k) plan, right? Simply download companies in your area that have filed a Form 5500. However, companies subject to state mandated plan requirements will not be found on that list because they don’t have a plan.
These companies may have traditionally flown under the radar, but now they will be required to offer a plan—and this is an opportunity! While they may be a little harder to pinpoint, you can find them with some digital exploration. Try using LinkedIn to search for local opportunities. Use social media to build an impactful and targeted list.
Search for companies within your area with more than five employees, since most state plans require or will require employers with more than five employees to comply. Start there. Then cross the list with your 5500 search. Your wholesalers, DCIO partners, TPAs and/or home office can provide data sorting support if you need it.
Identify Opportunities
Think of industries where a state-mandated plan would cause administrative burdens if they were forced into it. One that comes to mind are restaurants. Generally, restaurants have younger employees, high turnover and lower wages. If a restaurant has a state plan, the employer will need to auto-enroll all employees and collect and remit contributions. What if that employee only lasts six weeks? That could be a lot of administrative time wasted setting up that new hire.
On the other hand, the employer could set up a 401(k) retirement plan with the eligibility of age 21, 1,000 hours of service, semi-annual enrollment dates and an automatic rollover safe harbor. Under this plan design, the employer would save the hassle of immediate enrollment paperwork. It’s a great way to insulate the employer, save time and offer a retirement benefit to only those employees with proven longevity.
Use LinkedIn Ads
Did you know that with a budget of $10 a day, you can run ads on LinkedIn? You can target specific geographic locations and company demographics such as industry types, size and job titles. This means you can reach thousands of plan sponsors each day online! Consider running an ad addressing concerns employers may have about state plans and offer them an opportunity to join your webinar for more info.
Mail Information to Prospects
Send your targeted prospect list a two-page overview that discusses what employers need to know, like deadlines and penalties, and give them their options. Some employers might not realize that they can set up their own plans. Include a call to action to encourage employers to contact you.
Attend and Host Events
Attend networking events and talk about state-sponsored plans (pros and cons). Then ask the attendees what they have for a workplace retirement plan. You might be surprised to learn that some companies with hundreds of employees have never set up a plan.
Read more commentary by Rebecca Hourihan here.
Then partner with a local TPA and a 360° payroll provider and host a webinar. Promote it on social media and email, then educate employers on the state requirements and the benefits of a 401(k) plan. Talk about such things as eligibility, vesting schedules, creative plan design and employer tax benefits. Most state plans are requiring virtually immediate eligibility, have limited contribution flexibility, and offer no employer tax benefits.
Not employers are aware of the tax benefits that they can enjoy by setting up their own plan. Keep in mind that all this might be news to them.
Educate Your Centers of Influence
Invite your centers of influence to the webinar presentation. Educate them. There are certain nuances to each state plan; talk about them. For example, in California, even if an employer offers a retirement plan, they still need to register with CalSavers and then certify that they are exempt. If the employer does not do this by the deadline, they could face a penalty of up to $750 per employee for not complying on a timely basis. Yikes!
Issues for High-Income Earners
Here’s another Interesting angle to discuss with employers. Did you know that many state-sponsored plans are Roth IRAs? This means that high-income employees or those who are part of high-income households need to continually opt out.
We say continually because most state plans require that all non-participating employees be automatically re-enrolled every two years. So, if the employer has a high-income employee, that person needs to opt out, either through the state retirement website and/or through their employer.
Another consideration is if the employee is part of a high-income household. For example, let’s say the employee earns $50,000 per year; however, the employee’s spouse is a doctor and their combined household income is $300,000 per year. That employee also needs to opt out, because their household income is above the Roth IRA limits.
Find the Reason
For each employer not offering a plan today, there has to be a reason. Find it! Perhaps they believe a plan is too expensive or there will be too much paperwork. Partner with a TPA to set up an appropriate plan design that addresses those barriers. Find out which payroll provider the employer uses and then discuss seamless integration. As you work through these features and benefits, strive to create the best plan for that specific business.
Keep repeating this strategy, especially as it gets closer to your state’s required establishment deadline. This information will become very relevant as the deadline approaches. Be the advisory firm they think of when they need help.
Don’t Undervalue Yourself
One last thing: Don’t do it for free. As a startup plan, there will be zero dollars in it. Apply a set-up fee and get paid for your time. If the employer has 150 employees and they’ve never established a plan, it’s not for lack of resources (it’s for another reason). Don’t feel obligated to discount your services because it’s the way business has historically been done. Your time is valuable. They are a legit business and are used to paying professionals for their experience, advice and consulting.
Keep in mind that just because it’s a startup plan today doesn’t mean that it can’t be the beginning of a billion-dollar plan tomorrow.
Thanks for reading and Happy Marketing!
Rebecca Hourihan, AIF, PPC, is the founder and CMO of 401(k) Marketing, which she founded to assist qualified experts operate a professional business with professional marketing materials and ongoing awareness campaigns. This column originally appeared in the Winter issue of NAPA Net the Magazine.
