Are You Offering the Right Retirement Options to Your Employees?

The goal of any lifelong employee is to have enough money set aside to enjoy retirement.

However, it seems that people are pushing that off for later. According to reports, 40% of private sector workers age 45 and older are pushing back their retirement plans.

This begs whether businesses offer the retirement options their employees genuinely need.

The right retirement options can make or break an employee’s future in many different ways.

Your company's retirement benefits will go under a microscope as they lose more value from their shrunken retirement savings. Are you offering the right employee retirement options?

If not, or if mistakes are made in offering your retirement program, employees can sue your business. The solution is employee benefits liability insurance.

employee retirement plans and benefits liablity insurance

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People Don’t Want To Retire Due To Rising Costs

It is no secret that the cost of living keeps rising. People are always on edge, worried about how to pay the bills. Inflation puts pressure on individuals to bump up their salaries as well.

The problem that a lot of people are running into is growing liabilities. 

Inflation affects the amount of money people have to save for retirement. According to experts, the current inflation rate in the United States is at 8.3% for 2022, with a 40-year high of 9.1% in June 2022. All this means is that less money is going into retirement accounts, and it’s not stopping there.

As many as 44% of employees fear a market crash will destroy their savings.

As most retirement options are invested for growth, potential retirees are much more uncomfortable with their lower buying power.

Meanwhile, inflation is raising the prices of daily living. People spend more on housing, child care, food, transportation, medical care, and entertainment. These are all expenses that most people have to cover. 

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Simple IRA vs. 401(k): Which One Works Better?

The first thing you should know when facing retirement options is what kind of accounts are available. This will help you figure out your financial needs as well.  

There are two main types of accounts: pre-tax and after-tax. Pre-tax accounts include 401(k) plans and Simple IRA plans. The in-office versions to consider are 401(k) plans and 403(b) plans.  

The idea behind pre-tax retirement accounts is that contributions are deducted from employee salaries. The amounts deducted are pre-tax. This means that the contributions are taxed only when they are withdrawn.  

The 401(k) plan is a defined contribution plan that gives money to employees. This money can be invested in stocks, bonds, or mutual funds. Employees' money when they retire will depend on how much they invested, their salary, and their years with the company. 

Contributions made by employers, employees, or both, are tax-deferred. This means that the money goes into a separate account where it is invested. Employees can pick from a wide range of investments.  

The Simple IRA plan is a low-cost defined contribution plan. This plan is recommended for companies with fewer than 100 employees. The employer decides how much to contribute towards employee accounts.

How to Consider Retirement Offerings

These retirement plans make it easier for employees to save for retirement. However, different offers appeal to other people.

While 401(k)s work well for salary employees, simple IRAs work well for self-employed people. Let’s see how each plan compares:

Eligibility Requirments

The first thing you should look at is the eligibility requirements. Both plans require an employee to make a minimum contribution.

However, Simple IRAs have a higher minimum contribution level. Employers can take employee contributions to help them meet their contribution limits.

Investment Options

Investment options are the next important thing to consider. Both have several investment options to choose from.

Employees can choose their investment strategy. They also get more control over their investment. Worried about investing in the wrong product?

A 401(k) allows your employees to invest in low-fee options.

The best plan for you depends on your situation. However, plan fees can affect your investments significantly over time.

Contribution Limits

The contribution limits for both retirement plans depend on your salary.

The maximum Simple IRA contribution limit is $14,000, with $3,000 as a catch-up contribution.

The contribution limit for 401(k)s is $20,500 for 2022, subject to cost-of-living adjustments.

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Potential Cons Of Offering The Wrong Retirement Option

When employees have suitable retirement options, they tend to invest more.

The result?

Companies reap the benefits of happy, secure employees who show up daily, knowing their future is in good hands.

However, employees might lose hope when they offer the wrong retirement options. Here's what could happen if you provide the wrong retirement options.   

  • Lack of Investment Options - Not offering a good retirement option can discourage employees from putting money towards retirement. This will lead to lower employee contributions. The savings that employees are making aren’t earning enough money for them to retire.  
  • High Cost - Employees might choose the wrong ones if your company doesn’t offer good retirement options. As a result, they might incur high fees. This means that you are losing a lot of money. 
  • No Inspiration - Offering a bad retirement option isn’t going to inspire employees to save more money. After all, if your investment options don’t lead to savings, why should your employees even bother?  

Each of these issues points toward companies offering poor retirement options. When employees realize how bad the investments are, it’s too late.

Protecting Your Business With Employment Benefits Liability Insurance

Offering the right employee benefits is how you attract quality candidates and retain your quality talent.

However, there’s a lot more to the equation. You might have all the benefits your workers need, but you are not offering them the right package. 

Employment benefits liability insurance protects your business if something goes wrong with your employee benefits offerings.

This insurance policy will protect your company from employee lawsuits. It will give you legal advice and support, regardless of how much help you need.  

Rather than having to rely on in-house resources for legal help, one key benefit of liability insurance is that it gives you access to top lawyers in the field. You will have an advocate working for and with you.  

Employment benefits liability insurance is scalable. This means that you can adjust your liability insurance to meet your needs.

It will cushion you against predictable losses and cap your costs.    

How Can Employee Benefits Liability Insurance Cover Your Business

Employment benefits liability insurance covers lawsuits filed by employees.

A lawsuit could increase costs and damage your ability to hire high-quality talent in the future. Whether a small business or a large one, you need to be ready for anything.  

An employee might sue you if they feel the employee benefits you offered weren’t the right fit which in turn can increase expenditures, damage reputations, and expose the company to unnecessary risks.  

These lawsuits can lead to settlements and judgments that can damage a company financially. The biggest advantage of employment benefits liability insurance is access to a vast network of legal providers and advocates. You can process claims, conduct investigations, and find expert witnesses quickly. 

The insurance policy will pay for your legal costs. It will even pay your court costs and attorney fees. The insurance company’s legal team will work with your legal team to handle the paperwork and documents required during discovery. 

A disadvantage of not having employment benefits liability insurance is employee lawsuits can be draining. If you don’t have the right resources by your side, you risk losing more employees. 

READ NEXT: Belonging In The Workplace: What Is It And Why Does It Matter

Set The Right Insurance Options For Your Employees

Employees are the most critical asset of your company. You depend on them to help you grow your business. 

By offering the right employee benefits, you protect your business, your employees, and your reputation. These include retirement benefits that employees genuinely love.   

Having employment benefits liability insurance is a great way to create sustainability in your company.

At Rogue Risk, we believe a solid commercial insurance program provides the sustainability needed for businesses to take the necessary risks for profitable growth.

If this is the relationship you want with your insurance broker, we would love to talk to you.

I look forward to introducing you to a new way of viewing your insurance program.

Thank you,

Ryan Hanley


  • Article by Sophia Young

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