Mustachian CEO for a Day - Retirement/Insurance

[FrugalRubles]

Hello All,
I've been working at the same company for the past 8 years and have grown into the right-hand man of my CEO. He has been willing to listen to me regarding large scale changes in the company, particularly in things I passionate about (mostly mustachian, but just general employee quality of life type things). He is analytical and willing to make changes that benefit employees, provided they save the company money. With that said, I wanted to ask a few specifics of the MMM readership, but also post a more general question.

General:
If you were CEO of your company for a day, what changes would you make to improve employee's lives and benefit your company?

Specific:
401k - we currently offer a 401k plan via BlueStar. No company match. We used to use a different provider, but when we changed, I pushed big time for lower cost Vanguard options. He agreed with me and required these to be included. I am now pushing for the after-tax contributions and in-plan Roth conversions. BlueStar told me they did not offer this, but I am not overly confident in who I spoke with.

Health Insurance - we currently do not offer any HDHP. I am young and relatively healthy, so was debating asking whether we can make this an option so I can take advantage of HSA accounts. To be honest, I don't think any other employees would utilize this, so I don't know how hard to push.

What do you think?

Thanks!

[MDM]

...willing to make changes that benefit employees, provided they save the company money.

Yeah, that cuts the options significantly....

401k - we currently offer a 401k plan via BlueStar. No company match. We used to use a different provider, but when we changed, I pushed big time for lower cost Vanguard options. He agreed with me and required these to be included. I am now pushing for the after-tax contributions and in-plan Roth conversions. BlueStar told me they did not offer this, but I am not overly confident in who I spoke with.

Health Insurance - we currently do not offer any HDHP. I am young and relatively healthy, so was debating asking whether we can make this an option so I can take advantage of HSA accounts. To be honest, I don't think any other employees would utilize this, so I don't know how hard to push.

What do you think?

I think you've identified two major areas, the plan rules for 401k and company-provided health insurance, that fit the narrow opening between "benefit employees" and "save the company money."

[FrugalRubles]

...willing to make changes that benefit employees, provided they save the company money.

Yeah, that cuts the options significantly....

haha, I understand. This is his track record, but I am hopeful I can expand beyond it. We are having a good year, so hopefully that will go a long way.

401k - we currently offer a 401k plan via BlueStar. No company match. We used to use a different provider, but when we changed, I pushed big time for lower cost Vanguard options. He agreed with me and required these to be included. I am now pushing for the after-tax contributions and in-plan Roth conversions. BlueStar told me they did not offer this, but I am not overly confident in who I spoke with.

Health Insurance - we currently do not offer any HDHP. I am young and relatively healthy, so was debating asking whether we can make this an option so I can take advantage of HSA accounts. To be honest, I don't think any other employees would utilize this, so I don't know how hard to push.

What do you think?

I think you've identified two major areas, the plan rules for 401k and company-provided health insurance, that fit the narrow opening between "benefit employees" and "save the company money."

If you ignore the "save the company money," what else would you include?

[Guesl982374]

Healthy snacks --> might lead to reduction in health insurance costs that outweigh cost of food
Flex-time --> improves moral / have employees work when they are most productive --> leads to productivity gains
Shared Savings --> If an employee comes up with a savings idea they would receive a % of the benefit of one year (say 10-20% of what the company saves)
Stipend if someone walks / bikes / takes public transportation to work --> might lead to reduction in health insurance costs that outweigh stipend cost

[MDM]

If you ignore the "save the company money," what else would you include?

Two main areas:
1) Work area safety & comfort
2) Quality of life, whether inside or outside work.

Under #1:
- ergonomics for any job with repetitive motions.  E.g., desk worker, carpenter, pipefitter, etc.
- anything else that makes the work easier and safer.  Specifics will vary widely depending on what your company does.
- hire counter-cyclically.  In other words, hire more when business conditions are poor and fewer when they are good.  Leads to less employee stress when the cycle progresses.  Does require enough working capital to sustain the company through the low part of the cycle.

Under #2:
- free, healthy food at work
- telecommuting
- flexible schedules
- on site child care

Probably others but those are some.  Good luck!

[FrugalRubles]

Thanks. We do get lunch / dinner when we are at work, so that is a nice perk. I tend to lean toward that being a better option as it keeps me from spending $ and I have taken control of my own retirement expenses.

Vacation time has been a big point for me. We are hired with 10 days, then get 15 in year 2, but it stays @ 15 after that.
I've (conservatively in my view) advocated for 20 days after 5 years and 25 after 10. I was OK with capping @ that number.

The truth is, my boss is good to me and gives me a lot of flexibility outside the normal scope, but I like to argue for the same items to be given to all employees.

[Dr.Jeckyl]

It depends on the industry and the attrition. Many perks don't seem like cost savings until you can show that it can/will attract top talent in the field and retain them. Things like more paid time off, tuition reimbursement (stipulations you have to stay a certain amount of time), company match in the 401k, profit sharing, flex time, relaxed dress code when not meeting with clients, bring your dog to work... Also, there is a company BI Worldwide that offers a catalog that employees can chose awards from when they hit a milestone, generate additional revenue, etc... This would require your company probably paying BI something for the points. I'm not sure the details but all of the above are things that me or my freinds' companies offer to keep their employees happy. Also, training for other roles or departments to keep people challenged. Bored people leave.

[Threshkin]

I vote for the HDHP first.  This is an excellent, often overlooked savings option.

As I understand it in plan Roth conversions are rare in 401k plans.  But you should try to get the plan to offer a Roth investment option.  Roth is an excellent option for mustachian savers.  The oft stated "your taxes will be lower in retirement" may be incorrect for aggressive savers.

[1962colreb]

I would think offering better benefits to be key to employee retention and that is how I would
push this issue. Offering a generous 401k match tells employees you realize their financial future
is important.

[FrugalRubles]

It depends on the industry and the attrition. Many perks don't seem like cost savings until you can show that it can/will attract top talent in the field and retain them. Things like more paid time off, tuition reimbursement (stipulations you have to stay a certain amount of time), company match in the 401k, profit sharing, flex time, relaxed dress code when not meeting with clients, bring your dog to work... Also, there is a company BI Worldwide that offers a catalog that employees can chose awards from when they hit a milestone, generate additional revenue, etc... This would require your company probably paying BI something for the points. I'm not sure the details but all of the above are things that me or my freinds' companies offer to keep their employees happy. Also, training for other roles or departments to keep people challenged. Bored people leave.

I agree completely. We work in the legal world, but not an overly competitive or attractive industry. We pay our employees better than competitors, but we usually lose people looking outside our space. I have advocated more time off and we do have some remote work for the more senior people, as well as a relaxed dress code. I will have to look into BI Worldwide, that's an interesting idea.

I vote for the HDHP first.  This is an excellent, often overlooked savings option.

As I understand it in plan Roth conversions are rare in 401k plans.  But you should try to get the plan to offer a Roth investment option.  Roth is an excellent option for mustachian savers.  The oft stated "your taxes will be lower in retirement" may be incorrect for aggressive savers.

I agree on the HDHP, I just don't think most employees want to spend time understanding this. I have offered various training sessions on personal finance to my team and other colleagues, but most have not shown much interest in understanding.

We do have a Roth IRA option. I tend to think most employees plan to work into old age, so I don't know how much they are considering this vs. 401k.

I would think offering better benefits to be key to employee retention and that is how I would
push this issue. Offering a generous 401k match tells employees you realize their financial future
is important.

I agree as well, but I don't know if it's in the cards to be honest.

Thanks All!

[jim555]

OP -
Offer TransitChek mass transit benefit, which allows up to $255 a month to be paid with pre-tax money.  This saves the employees tax on that amount and the employer the SS match tax on the amount.

[FrugalRubles]

OP -
Offer TransitChek mass transit benefit, which allows up to $255 a month to be paid with pre-tax money.  This saves the employees tax on that amount and the employer the SS match tax on the amount.

Thanks! We just started doing this last year!

[Patches]

Look into a 401k Safe Harbor Plan.  This would allow him and the other employed owners to bonus themselves pretax up to $53,000 into their 401ks.  And by his taking advantage of this, it's required he bonus the employees as well into their 401ks.  This percentage is based on a variety of metrics... # of employee, wages, etc... but often results in a 5%ish bonus to employees (plan minimum is 3% bonus regardless of the bonus he takes).

This will have a long-term positive effect on the company's payroll taxes... as salaries naturally adjust in kind with this bonus.

[FrugalRubles]

Look into a 401k Safe Harbor Plan.  This would allow him and the other employed owners to bonus themselves pretax up to $53,000 into their 401ks.  And by his taking advantage of this, it's required he bonus the employees as well into their 401ks.  This percentage is based on a variety of metrics... # of employee, wages, etc... but often results in a 5%ish bonus to employees (plan minimum is 3% bonus regardless of the bonus he takes).

This will have a long-term positive effect on the company's payroll taxes... as salaries naturally adjust in kind with this bonus.

I know we have looked into this, but I don't believe a 401k match is something we will definitely do. This led me to ask about allowing after-tax contributions so that mustachian employees can still save a higher %. Out of curiosity, how does this affect payroll taxes?

[Patches]

Pitch it to him as a way for him to get a nice tax free bonus.  That'll blur his vision on the burden of bonusing the employees a mere fraction of what he's getting.  Also pitch him on the lower pay roll taxes... tell him to take a $30k salary cut and bonus himself pretax $50k (or whatever he wants to do).  He gets a nice raise via 401k bonuses and the company pays less payroll taxes (the 30k less hitting payroll).

And long term, the 401k bonus will become factored into everyone's pay.. thus everyone's salary will go stagnant for a few years.  No COL raises = less real $ hitting payroll.  Depending on # of employees, the payroll tax savings could far out weigh you're bosses bonus.  Which has proven to be the case at my company.

Put it in terms that it will benefit every single person (but especially him) and the company.

And in truth, it will benefit everyone.  It'll at least force people into a 401k addition via the company... and might spur their collective savings for retirement.

Tragically most of my employees end up raiding their 401ks every few years for the financing of giant pickup trucks... but that's a topic for another thread.

Look into a 401k Safe Harbor Plan.  This would allow him and the other employed owners to bonus themselves pretax up to $53,000 into their 401ks.  And by his taking advantage of this, it's required he bonus the employees as well into their 401ks.  This percentage is based on a variety of metrics... # of employee, wages, etc... but often results in a 5%ish bonus to employees (plan minimum is 3% bonus regardless of the bonus he takes).

This will have a long-term positive effect on the company's payroll taxes... as salaries naturally adjust in kind with this bonus.

I know we have looked into this, but I don't believe a 401k match is something we will definitely do. This led me to ask about allowing after-tax contributions so that mustachian employees can still save a higher %. Out of curiosity, how does this affect payroll taxes?

[FrugalRubles]

Pitch it to him as a way for him to get a nice tax free bonus.  That'll blur his vision on the burden of bonusing the employees a mere fraction of what he's getting.  Also pitch him on the lower pay roll taxes... tell him to take a $30k salary cut and bonus himself pretax $50k (or whatever he wants to do).  He gets a nice raise via 401k bonuses and the company pays less payroll taxes (the 30k less hitting payroll).

And long term, the 401k bonus will become factored into everyone's pay.. thus everyone's salary will go stagnant for a few years.  No COL raises = less real $ hitting payroll.  Depending on # of employees, the payroll tax savings could far out weigh you're bosses bonus.  Which has proven to be the case at my company.

Put it in terms that it will benefit every single person (but especially him) and the company.

And in truth, it will benefit everyone.  It'll at least force people into a 401k addition via the company... and might spur their collective savings for retirement.

Tragically most of my employees end up raiding their 401ks every few years for the financing of giant pickup trucks... but that's a topic for another thread.

Trying to do the math here. Here is what I read about safe harbor:

When the basic safe harbor match is used, a plan must provide a matching contribution at a minimum rate of dollar for dollar on the employee deferrals up to 3% of pay and 50¢ per dollar on the next 2% of pay.

Let's say we have 50 employees with an average salary of $50k.
Total Salary Expense is $2.5M.
The mandatory contribution for Safe Harbor is $100k. This would then allow all Highly Compensated Employees to contribute the $18k / year.

Are you saying he can then adjust his (or any other HCE) with a larger 401k match?

Your suggestion is to then limit / restrict raises to pay for this, which saves payroll taxes?

[Laura33]

FYI, also legal field, and here is what we have:  we are all eligible to do regular $18K 401(k).  Partners can then get an extra @$32-33K/yr put into their 401(k) tax-deferred at the end of the year.  However, in order to do this, we need to make sure that the ratio of lower-comp to higher-comp employees in the plan remains acceptable.  This means that for staff, we usually end up giving them some sort of bump-up in their 401(k)s as well. 

So there is definitely a marginal additional cost with this (though, per the above, you can "pay" for the employee bump-up by reducing other bonuses).  It is worth it to the partners, though, because it means we get to save @$50K tax-deferred instead of the normal $18K. 

My other suggestion here would be a match with a vesting schedule.  I see what you are saying about the costs, of course.  However, if you do the match in a way that each year's contributions vest only after say 2-3 years, then you don't end up paying it out at all for people who leave quickly -- and it really does serve as a retention incentive for people who are interested in staying.

What about a mentoring program?  Not like "hey let's go to lunch once a year and I'll pretend I care."  Things to help employees understand the additional skills they need to make the next step up, and helping them to create a plan to get there.  IME, our younger folks are very interested in learning and developing, and they are very happy to get the signal that we want to help them grow their careers.

Other than that, flexibility -- liberal work from home, comp time, part-time schedules, etc.  Or, you know, ask your employees what they care about most.

Tl;dr:  It's less about the specific stuff than about the attitude behind it; employees can tell when you actually care about them and their lives and their career development, vs. when you are just throwing out "programs."

[FrugalRubles]

FYI, also legal field, and here is what we have:  we are all eligible to do regular $18K 401(k).  Partners can then get an extra @$32-33K/yr put into their 401(k) tax-deferred at the end of the year.  However, in order to do this, we need to make sure that the ratio of lower-comp to higher-comp employees in the plan remains acceptable.  This means that for staff, we usually end up giving them some sort of bump-up in their 401(k)s as well. 

So there is definitely a marginal additional cost with this (though, per the above, you can "pay" for the employee bump-up by reducing other bonuses).  It is worth it to the partners, though, because it means we get to save @$50K tax-deferred instead of the normal $18K. 

My other suggestion here would be a match with a vesting schedule.  I see what you are saying about the costs, of course.  However, if you do the match in a way that each year's contributions vest only after say 2-3 years, then you don't end up paying it out at all for people who leave quickly -- and it really does serve as a retention incentive for people who are interested in staying.

What about a mentoring program?  Not like "hey let's go to lunch once a year and I'll pretend I care."  Things to help employees understand the additional skills they need to make the next step up, and helping them to create a plan to get there.  IME, our younger folks are very interested in learning and developing, and they are very happy to get the signal that we want to help them grow their careers.

Other than that, flexibility -- liberal work from home, comp time, part-time schedules, etc.  Or, you know, ask your employees what they care about most.

Tl;dr:  It's less about the specific stuff than about the attitude behind it; employees can tell when you actually care about them and their lives and their career development, vs. when you are just throwing out "programs."

Thanks Laura. Currently, everyone is eligible for the $18k, but no match. For this reason, many employees do not contribute. I believe last year we auto enrolled everyone @ 1%.

When you say partners get an extra, is that just paid for by your company, a la profit sharing? I know we had issues in the past with HCE contributing too high a percentage of the total money, so the ratio was based on funds contributed, not # of people enrolled (usually HCE do $18k and LCE do $2-3k).

I agree on the match with vesting schedule vs. Safe Harbor, but I am sure we have to deal with our accountant to evaluate all the ins and outs. I am interested to pitch rough #'s so my boss will look @, but in most cases, he will need to confirm whatever I put forward.

I agree completely on mentoring program. It's hard of an initiative I have pushing but it always gets bottlenecked up the chain. I enjoy it also b/c I agree to take on different training initiatives but most are of the more informal variety.

Thanks!

[Drifterrider]

Hello All,
I've been working at the same company for the past 8 years and have grown into the right-hand man of my CEO. He has been willing to listen to me regarding large scale changes in the company, particularly in things I passionate about (mostly mustachian, but just general employee quality of life type things). He is analytical and willing to make changes that benefit employees, provided they save the company money. With that said, I wanted to ask a few specifics of the MMM readership, but also post a more general question.

General:
If you were CEO of your company for a day, what changes would you make to improve employee's lives and benefit your company?

Specific:
401k - we currently offer a 401k plan via BlueStar. No company match. We used to use a different provider, but when we changed, I pushed big time for lower cost Vanguard options. He agreed with me and required these to be included. I am now pushing for the after-tax contributions and in-plan Roth conversions. BlueStar told me they did not offer this, but I am not overly confident in who I spoke with.

Health Insurance - we currently do not offer any HDHP. I am young and relatively healthy, so was debating asking whether we can make this an option so I can take advantage of HSA accounts. To be honest, I don't think any other employees would utilize this, so I don't know how hard to push.

What do you think?

Thanks!

None whatsoever.  The CEO is responsible for improving the lives of the owners (profit).

Having said that, if I were an employee I would prefer to have company match for my 401K.  If the current provider of the financial services won't do it, find another one.

Tax deferred money is more valuable to me than taxable current bonus checks.  I would also, as an employee, want to have the matching contributed each pay day (I know one company I worked for made a once per year contribution; at the end of their year).

[MDM]

If you were CEO of your company for a day, what changes would you make to improve employee's lives and benefit your company?

None whatsoever.  The CEO is responsible for improving the lives of the owners (profit).

I understand that general philosophy, but most CEOs probably put improving their own lives above all.  Otherwise, the CEO (especially the highest paid CEOs) could deliver millions of dollars to the owners by cutting their own (the CEOs') salaries, eh?

[Laura33]

General:
If you were CEO of your company for a day, what changes would you make to improve employee's lives and benefit your company?

None whatsoever.  The CEO is responsible for improving the lives of the owners (profit).

Well, that's short-sighted.  I am an owner, and unhappy employees cost me a shitload of money.  I spend two years training them until they are actually valuable, and then they leave.  Or they just trudge along doing the minimum they can to get by; our work demands periodic nights and weekends, frequently on short notice, so why would someone be willing to go to the wall for me and sacrifice their own personal time if I treat them like shit?  And that makes my life difficult, because then I have to do that work myself so our clients don't get pissed and leave.  And I don't like things that make my life more difficult.

The fundamental problem here is that your best employees will always, always have other options.  Make it clear to them that you don't care -- that you are just out to suck as much work from them in return for as little from you as possible -- and they're gone.  And then you're left with the mediocre-to-poor performers, because they don't have other options.  Which then costs you more time in managing, more time in trying to develop them, more time in trying to hire new people, more time in figuring out how to get rid of someone who isn't pulling their weight without getting sued -- none of which brings in any money.  IOW, you are forcing the folks with the highest hourly rate to spend hours and hours on nonbillable bullshit because you don't have the right people at the lower rates doing the actual work. And then when I have to jump in and do the work myself, I end up writing off half of the time, because the client expects that to be done by those cheap people -- so I blow my weekend and don't even get paid for it.  Fuck that.  Talk about opportunity cost. 

The best part is, when you're paying attention to what your employees actually care about, you can frequently make them happy without throwing a lot of shareholders' profits at them.  "Real" mentoring and development makes a huge difference to ambitious young kids.  We give people 16 weeks (unpaid) maternity leave instead of the mandatory 12, and they love the extra 4 weeks.*  We let people work from home whenever their work allows; maybe that means they only get 6 hrs in when a kid is sick, but they appreciate the flexibility, and it's win-win beecause the alternative would be to force them to take off and we get a big fat 0 from them that day.  Etc. etc. etc.

YMMV, of course.  If you are in a field in which people are widgets and one is as good as the next, feel free to treat them like shit.

*We do give some paid parental leave to both, but just focusing on the extra time here, because that's not an out-of-pocket cost that eats shareholder profits.

[FrugalRubles]

Well, that's short-sighted.  I am an owner, and unhappy employees cost me a shitload of money.  I spend two years training them until they are actually valuable, and then they leave.  Or they just trudge along doing the minimum they can to get by; our work demands periodic nights and weekends, frequently on short notice, so why would someone be willing to go to the wall for me and sacrifice their own personal time if I treat them like shit?  And that makes my life difficult, because then I have to do that work myself so our clients don't get pissed and leave.  And I don't like things that make my life more difficult.

The fundamental problem here is that your best employees will always, always have other options.  Make it clear to them that you don't care -- that you are just out to suck as much work from them in return for as little from you as possible -- and they're gone.  And then you're left with the mediocre-to-poor performers, because they don't have other options.  Which then costs you more time in managing, more time in trying to develop them, more time in trying to hire new people, more time in figuring out how to get rid of someone who isn't pulling their weight without getting sued -- none of which brings in any money.  IOW, you are forcing the folks with the highest hourly rate to spend hours and hours on nonbillable bullshit because you don't have the right people at the lower rates doing the actual work. And then when I have to jump in and do the work myself, I end up writing off half of the time, because the client expects that to be done by those cheap people -- so I blow my weekend and don't even get paid for it.  Fuck that.  Talk about opportunity cost. 

The best part is, when you're paying attention to what your employees actually care about, you can frequently make them happy without throwing a lot of shareholders' profits at them.  "Real" mentoring and development makes a huge difference to ambitious young kids.  We give people 16 weeks (unpaid) maternity leave instead of the mandatory 12, and they love the extra 4 weeks.*  We let people work from home whenever their work allows; maybe that means they only get 6 hrs in when a kid is sick, but they appreciate the flexibility, and it's win-win beecause the alternative would be to force them to take off and we get a big fat 0 from them that day.  Etc. etc. etc.

YMMV, of course.  If you are in a field in which people are widgets and one is as good as the next, feel free to treat them like shit.

*We do give some paid parental leave to both, but just focusing on the extra time here, because that's not an out-of-pocket cost that eats shareholder profits.
[/quote]

[/quote]

We are in complete agreement. The actual costs of an average employee is significant vs. a good one. Factor in additional training, reviewing, then add in recruitment costs and hiring new employees, you need to treat every employee with respect and great ones like gold. I am hoping to elevate the standard perks and then offer additional ones to high level performers.