The Reason

by +Matt Bagell 

(Financial Contributor for Humareso)

As a financial planner, I run into the same question all the time when talking to a business owner, hr specialist or controller.  Which retirement plan should we set up for our company?  They always seem to be leaning towards a solution but are not sure what the full details are with regard to the various plan options.  

You just need to know one simple thing; what is "The Reason" for creating one for your company.

Let's face it.  Some business owners are extremely interested in putting a lot of money away for retirement and taking advantage of as many tax deductions as possible.   In a perfect world, a business owner could do this while receiving a tax break from the government at the same time without limitations.  Unfortunately, there are caps to what you can do and it depends on what plan you choose.  On the other hand, a business may be solely focused on enhancing the benefits they are offering to their employees.  The company may see a retirement plan as a way of keeping their employees around and also attracting new ones as well.  

I could bore you with all of the details that go along with a SEP IRA, Simple IRA, and 401k plan but if anything else you have to first realize that these plans allow contributions to increase to a level much higher than an individual IRA.  In 2015, the traditional IRA contribution limits are $5,500 and $6,500 if age 50 or older.  The limit allows for a decent contribution but a business retirement plan such as a SEP IRA allows for contributions up to $52,000 in 2015. Now that is a huge difference.  If you put that amount against a 30% tax bracket, you would receive over $15,000 in tax savings in just this year alone. If your company has many employees or is likely to grow, a 401k/ Profit sharing plan might be more suitable.  You will have the flexibility to decide if you want to invest more or less each year and can limit the benefits provided to the employees based on actuarial testing.  

There are many factors that affect how a retirement plan will work including the age of employees, the number of employees, the salaries of employees and the contribution amount of the employer(s). This is why a decision should not be rushed.  A Simple IRA plan, for example, does not allow for higher contribution limits compared to other business plans but the out of pocket cost is less for the employer to set up. 

Retirement plans are great ways to really improve your company.  The business owner(s) can really take advantage of putting money away and the employees are also set up to come along for the ride. Think about it. When else does the government hook you up with a discount on taxes for saving your own money. By the way, they also let your money grow tax free before withdrawals. Not a bad situation if you are able to contribute steadily throughout your working career.

So, first start with "The Reason" you are considering a plan. From there, it will be a lot easier to figure out what fits your company's needs.

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Nothing Compares to You

There is likely no more appropriate focus for business today than to deal with the idea of entitlement.  Our workforce is pushed to consider self.  And while it is necessary to consider self in the grand scheme of life, it does not equate to all policy and business direction being dictated as it relates to self.

In our schools, for example, we have acclimated to testing utilizing a variety of methodologies and techniques.  If someone is a poor traditional test-taker, then we have allowed them to verbally take the test with the teacher or demonstrate a mastery of the subject matter is other ways.  Now move that same student ahead 10 years into the workforce.  How many different ways are there for the worker to demonstrate his/her mastery of the subject (work)?  Most times, there’s just one.  We assess in specific, often singular, ways.  A product has to look and function in a certain way; even the service industry has parameters to stay within.

The point is not necessarily that we assess in various ways (though I would lean towards such a thought), but rather our workers are left outside of the process.  They then slip into a fight or flight mentality.  Turnover comes easier when I realize I can’t do the work the way you want.  I will leave, no problem.  If I am 24, I will find another entry level role.  I’m young.  No big deal.  If I am 44, I will find another role.  I’m still young enough (please don’t tell me that this is not still young…I might just breakdown).  No big deal.  Plus there is always unemployment insurance to assist me in the transition.

But, if I choose to fight, I will retreat to entitlement.  I will call upon the god of entitlement and its minions - accommodation, leave and disparate treatment.  How can I take care of me?  How has this work environment been unhealthy?  It cannot be that I am unable to do what’s required of me, but rather it must be how terrible it is here at work.

Sound familiar.  Let me hit that nerve even more.  How many businesses are living in fear of their employees?  What if they sue?  Complain?  Gulp…call the Department of Labor?  The organizations established to protect the American worker are viewed as the enemy of American business.  How did this happen?  Entitlement.  (There are real situations where a breaking of the law is happening in some companies; it has to be addressed.  Of course it does.  I am not swinging the pendulum too far the other way.)

So, what to do?

• Address it – don’t be scared!  Call it out.  Say, “We all come from a position of entitlement.”  Work through simple examples.  Don’t accuse.  Share general observations.  Let people laugh at you.  Let them laugh at themselves.
• Be transparent – as best as you can, share financials.  Let people know that the pot is only so big.  Yeah, I want to live at Google offices, too, but we can’t.  Who’s going to pay for it?  Once some more liquidity is in our hands, how should we spend it?  Which of these three options makes better sense in light of our financials and our mission?  Let employees engage!
• Coach – devise a plan to battle “me first.”  How do we call it out in each other without irritating the stew out of each other?  There is nothing wrong with asking a question about self, but is that the default position?  Demonstrate business acumen and meet your employee where he/she is.  Guide them through components of business decisions.  Long term, this will pay off in huge dividends…and I don’t mean just money.

I believe we are better than entitlement.  We have to be.  Our business cultures, our family units, society as a whole needs us to move beyond this perspective.  When we see it, we have to take action.  Healthy, lasting business development comes out of a functional belief in the work to be done and the integrity it takes to do it.  Encourage pride, speak to the struggles and affirm correct competencies.  We are more than one.

Everyday I Write the Book

Executives are pressured to be budget-minded while increasing sales and productivity.  “Do more with less” is the banner many are forced to hold high while walking across the customer service area or the down the manufacturing line.  The pressure of expanding territory, managing the brand(s), and keeping talent in the building require complicated maneuvering.  While begging, pleading and groveling tend to be our default posture, we can really choose differently and with a better chance for lasting effect.

A detailed, passionate plan is necessary for a Human Resources professional to be engaged in the business process.  We have to sit down and create an action plan with both pre- and post-process details.  This may very well be a daily process.  There are moving parts and market fluctuations that cannot be depended on to remain static.  The dynamic nature of our commerce requires us to be nimble and adaptable.  Write and review processes everyday.  Grab your coffee (or latte or Oprah Chai Tea or whatever it is you like today).

Pre-Process:

• Where are the pain points of the company?
• How did it get this way?  What has to change?
• What are the expectations for the company as described by the Executive team?
• Who should be handling certain components of the process?  When can I sit with them to review?

Post-Process:

• What elements were accomplished?  What’s working well?
• Where are there still missing pieces? Who is addressing those needs?  How?
• Who is/was unable to handle the responsibilities given?  Time for change?

These questions can be drilled down more, but the general idea is to challenge yourself to answer them.  Sit down ahead of time with the pre-process list of questions and write down answers.  When we answer them in our heads only, it’s often the case that’s where they’ll stay.  Write the answers; from these answers, an action plan is created.  This is not an exercise in accountability only, but also in planning with purpose. 

Our companies are in need of dynamic resources to handle the mandate of “more with less.”  I don’t see this trend changing anytime soon.  The fear of finances around tax increases, ACA compliance and global military activity is real and impacts markets.

Listen, for those of you still holding onto hope that you’ll be allowed to fill that job requisition for additional help in your department…let it go.  Don’t depend on it.  It’s been two years.  The company is not bringing on another HR Generalist for you.  Be creative, be industrious, but don’t be stupid.  If the answer is that next quarter might look better and we’ll see then, give it up.  Work with what you have; just work it stronger and with real expectations.  I have had the opportunity to sit with HR departments who regale me with the plans they have for an additional person they’ll eventually be allowed to have.  In the meantime, though, that list of work and plans sits dormant waiting for that person.  Why?

Meet with the executive team to determine the fiscal expectations of the company for the next 6 months.  Then take that understanding and create the process list for pre-, during and post-.  Assign roles, speak to the cultural leadership needed and provide timelines.  Yes, hold people accountable, including yourself, but do it based upon a clearer understanding of the expectations of the company’s financial strategy. 

Oh yea, for those of you reading this who are saying, “no one on the executive team shares this with HR,” then figure out how to make them.  Give them the business case for HR’s involvement.  Show them what you know how to do.  Let them see the resources you have ready to go once you know where you’re going.  Of all people, HR seems to know how to do more with less.  We’ve done it for decades.