Managing Human Resources-Phase 2 DB2 - Essay Example

Managing Human Resources, Phase 2 DB 2 The goal of this report is to show how I would present a 401k to new employees at NL&C. The primary audiencewill be new hires, and the presentation will be made during their new-employee orientation. My goals are threefold: (1) to create value in the eyes of the new employees, so that they see this as a meaningful benefit to working at NL&C, (2) to insure that the participation rate is high, as it is a good long-term way to insure employee loyalty, and (3) give them the facts that they need in order to make an informed decision.

The basic facts of 401k’s are the following:1. Many companies, including NL&C, offer matching contributions up to a certain percentage of an employee’s pay, capped at a certain amount of contribution per employee per month. (AllFinancialMatters, 2006)2. The 401k contribution is a “defined contribution plan,” which means that the amount put in is set by the employee, and the amount received upon retirement depends upon the performance of his/her investments during the intervening period.3. The 401k is exempt from current income taxes, state and federal.

This means that the amount contributed can be deducted from the employees’ current net income when calculating for tax purposes (Block, 2007).The primary reasons why companies want to implement 401k plans are twofold: (1) to encourage employees to provide for their retirement, particularly given the likelihood that social security payments will not cover their overall costs when they retire, and (2) to help make the employee more loyal, and more likely to stay and perform for, the company which grants and administers the 401k.

Unfortunately, most companies do a poor job of explaining the 401k, and as a result have low participation rates. My plan is to appeal particularly to the younger employees (which are most of those joining NL&C), who can benefit most from a long-term savings plan. Since young people think less about their retirement, I want to point out the other advantages:a. They can have access in case of a major illness or job interruption…thus, it has an insurance value (Hogan, 2003).b. They can offset some of their 401k with bank loans when they want to buy a house…thus allowing them to buy a house more quickly.c. By deducting their 401k plans from their weekly wages, they are less likely to spend the money, because it never enters their bank account.

This “forced” savings effect is less painful than trying to put aside money.d. Then I plan to do the math using different strategies suggested by the employees, includinga. An assumption of stocks-only investing for the next 40 years. At 8% per year, a $200 per month contribution will get them $1 million.b. I will also make an assumption that they borrow against their 401k to buy a house, and assume a 5% increase in house value per year, leveraged at 80%, which will double their equity in less than 10 years.c. Finally, I will demonstrate that everyone in the room can be a millionaire on a ‘middle class’ salary, and give them the opportunity to dream about how they might be able to retire early on that amount.

Since 401k’s are individual matters and require some privacy, I am going to work with our IT department to create individual 401k planning sheets on the internet to allow each employee to try out these scenarios for themselves.BibliographyAllFinancialMatters. (2006, December 6). AllFinancial Matters. Retrieved September 17, 2007, from Contribution Limits for 2007 401k: http://allfinancialmatters.com/2006/12/06/401k-contribution-limits-for-2007/Block, J. (2007, September 17). Can I take a tax deduction for my 401k Contribution on my tax return?

Retrieved September 17, 2007, from WWW Tax: http://www.wwwebtax.com/deductions_z_other/401(k)_contributions.htmHogan, J. (2003, July 11). Pardon the Interruption. Houston Business Journal , p. n.p.