Above And Beyond Promotion

Posts Tagged ‘employee’

By ANNE TERGESEN

A 2006 law designed to boost employees’ retirement-savings is having the opposite effect for some people.

Under the law, companies are allowed to automatically enroll workers in their 401(k) plans, rather than require employees to sign up on their own. The measure was intended to encourage more people to bulk up their retirement nest eggs—a key goal in a country where millions of people aren’t saving enough.

But an analysis done for The Wall Street Journal shows about 40% of new hires at companies with automatic enrollments are socking away less money than they would if left to enroll voluntarily, the Employee Benefit Research Institute found. The nonprofit performed a complex computer simulation of savings patterns drawing on data from more than 20 million 401(k) participants.

The problem: More than two-thirds of companies set contribution rates at 3% of salary or less, unless an employee chooses otherwise. That’s far below the 5% to 10% rates participants typically elect when left to their own devices, the researchers said.

“Automatic enrollment is a double-edged sword,” said Brigitte Madrian, a professor at Harvard University who is an expert on 401(k)s. “On the one hand, there’s more participation. On the other hand, lots of employees are stuck at whatever default the employer selects.”

The total annual amount being put into 401(k) plans has increased by 13% since 2006, to an estimated $284.5 billion this year, according to consulting firm Cerulli Associates. That is largely because the rule has successfully prodded millions of people who wouldn’t have saved a penny for retirement to start saving something.

But for the 40% of new workers who would have picked a higher savings rate than the company assigned to them, billions of dollars in potential retirement savings will be left on the table, said Pamela Hess, director of retirement research at Aon Hewitt. The human-resources consulting and outsourcing company serves as a record-keeper for $296.8 billion in 401(k) plans.

View Full Image

EBRI evaluated the contribution rates of people of similar ages and salary levels eligible for 401(k) plans with automatic enrollment versus those in plans that require workers to join voluntarily, examining data stretching back 11 years. To project future savings patterns among auto-enrolled participants, EBRI ran a computer simulation based on a variety of scenarios concerning wage growth and the adoption of higher contribution rates over time.

Simple inertia takes over for many workers, said Kristi Mitchem, head of the global defined-contribution business at State Street Global Advisors, which manages more than $297 billion in 401(k) plans.

When Joe Osborne, 25 years old, joined E*Trade Financial Corp. as a senior specialist in corporate communications in April, he was auto-enrolled at 3% of pay. Although he said he plans to increase his contribution rate, he has yet to do so. “I’m still adjusting to my budget,” he said.

A spokeswoman for E*Trade said the financial-services company went with 3% because “if you start the rate too high, the chances of employees opting out are higher.”

Some auto-enrollment programs have “auto-escalation” features that increase employee savings rates by a set amount, typically one percentage point a year, until they reach a certain threshold. Even this might not be enough: An October study by EBRI and the Defined Contribution Institutional Investment Association found that, depending on their incomes, 54% to 73% of employees would fall short of amassing enough money to retire if they enrolled in their companies’ 401(k) plans at the default-contribution rate and were auto-escalated by 1% a year to a maximum of 6%.

The Pension Protection Act of 2006, which was designed to shore up the pension system, also encouraged wider adoption of auto-enrollment in 401(k) plans. It removed obstacles such as state laws that restricted the practice and shielded employers who use certain types of investments from liability for losses suffered by participants who are auto-enrolled.

The law has boosted auto-enrollment and participation rates dramatically. About 57% of large companies now automatically enroll new employees in 401(k) plans, up from 24% in 2006, according to Aon Hewitt. While employees are free to opt out, companies report average participation rates above 85%, compared with 67% for those without auto-enrollment, Aon Hewitt says.

Yet 401(k) participants’ average savings rates have fallen in recent years. Among plans Aon Hewitt administers, the average contribution rate declined to 7.3% in 2010, from 7.9% in 2006. The Vanguard Group Inc. says average contribution rates at its plans fell to 6.8% in 2010, from 7.3% in 2006. Over the same period, the average for Fidelity Investments’ defined contribution plans decreased to 8.2%, from 8.9%.

Vanguard estimates about half the decline “was attributable to increased adoption of auto-enrollment.”

David Navari, 45, was auto-enrolled at 3% when he joined Computer Sciences Corp. as a consultant in October 2008. Although the Takoma Park, Md., resident said he maxed out his contributions to previous employers’ retirement savings plans, he stuck with 3% during his two years at CSC. The extra cash was helpful in meeting private-school tuition bills, he said.

CSC said it “offers auto-enrollment and auto-escalation to simplify the enrollment process, by helping busy employees save for their future with significant tax advantages during their working years.”

Many companies said they selected a 3% default contribution rate in part out of concern that a higher rate could prompt employees to drop out of these plans.Medtronic Inc. spokeswoman Cindy Resman said the medical-device maker opted for a 3% contribution rate because that was the prevailing rate in 2007, when the company implemented auto-enrollment.

Another factor may be pushing down default rates: Some companies that match some employee contributions can save money with a lower default rate. According to a 2011 Aon Hewitt survey, 73% of employers without auto-enrollment cite “the increased cost of the employer match as a primary barrier” to adopting it this year.

Over time, many employees raise their contribution rates. Still, 15% to 25% of workers eligible for 401(k) plans with auto-enrollment are unlikely ever to catch up to the annual contribution rates they would have chosen under plans with voluntary enrollment, estimates Jack VanDerhei, the EBRI’s research director.

Consultants say some companies assume regulators intended to steer companies to a 3% default contribution rate, because that was the example the IRS used in its initial automatic-enrollment regulations issued in 1998. Regulators are trying to make it clear that companies are free to raise their default contribution rates. Mark Iwry, a deputy assistant secretary at the Treasury Department, said the agency has issued guidance to state that companies “are not limited to an initial 3% deferral rate.”

“What we have hoped all along is that employers and employees would get comfortable with higher levels of automatic contribution,” he said.

Write to Anne Tergesen at anne.tergesen@wsj.com

Job promotions are not something that happens all of a sudden. Getting promoted is not only about your growth but it is equally proportional to the benefits an organization expects you to deliver for them. In short to expect a promotion one has to prove his abilities and capability as an individual or in other words be an efficient employee.

In order to achieve the status of an efficient employee one must keep the following things in mind:

· Ensure that you do your job well within the time and at desired quality levels

· Master your job: make sure you know the current job you are on as well as the back of your hand. Be an expert.

· Try and keep yourself away from workplace politics and gossips. Having said that, do not totally exclude yourself from the workplace politics because having contacts and having influence can help as well as hinder, so be selective and have the correct approach.

· Be a good listener, this will always help you to enhance your working capabilities.

· Have a positive approach towards responsibilities delegated on you.

· Always try and do a bit extra then what you have been asked to do while strictly keeping in mind the work done is acceptable and useful to the company.

· Look presentable: Although it may sound strange that how the way you look has an impact on your working capacities but it definitely changes the way a person perceives you.

· Patience is required in some instances where after meeting all the above points a promotion is not secured, hang on its on the way.

· Continuously keep upgrading your skill rapid changes in technology and management approaches it’s absolutely necessary for an employee to upgrade continuously to enable him to perform well as well as keep his chances for a promotion alive.

The speed and ease of internet online advertising has become attractive to an increasing number of employers looking for qualified employee candidates. Not only is advertising immediate, reaching a broader audience than any other form of media, but ads advertising online yield quicker responses from interested persons.

The Benefits of Ads Advertising Online

Aside from being a quick and easy form of advertising, more and more job seekers are turning to the internet for online job search purposes. They know tapping into online resources when looking for employment, benefits them by broadening job possibilities, and online profiles and résumés are made readily available to employers at the click of a button.

Employers save precious time not having to meet with job applicants in their offices, only to discover minutes into the interview the person is unqualified. Handling resumes online and viewing the applicant’s online profile equips the employer with a time-saving method of culling ineligible applicants to find the perfect candidate.

Internet online advertising also provides the employer with an effective means of sharing employee information with sister offices or other staff involved in the hiring process. E-mail applicants and online resumes are easily forwarded and can be easily retained in an online “bank” of possible candidates for future purposes.

Employer advertising trends reveal that the job online market is the wave of the future. Web sites catering to employer/employee matchmaking services such as istaffsolution.com make world-wide advertising online affordable, and an effective means of networking for online job search purposes.

Advertising Online; a Win, Win Solution

Advertising online is a win, win solution for both the employee and the employer. Broad range distribution of “employee wanted” and “employee for hire” type advertisements increases success in a shorter time span than other forms of advertising.

With a possible savings of $100s or even $1,000s of dollars in advertising, advertising online is also the most cost-effective method of advertising available, and yields better results.

In fact, some online resources allow the employer to “test drive” their services before paying. At istaffsolution.com, for instance, employers have the opportunity to register for free, before becoming a member.

A test search for available employees, and an opportunity to view profiles and resumes provides the employer the chance to determine for themselves whether or not that service is the recruitment solution for them.

And, with no finders fee, no unnecessary time wasted interviewing unqualified applicants, and complete control over whether or not to initiate direct contact with applicants, employees are shouting a resounding “Yes” to internet online advertising!

© 2006 Lori S. Anton for istaffsolution.com