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September 7th Is 401k Day; Help Your Employees Become "Retirement Ready"

With National 401k Day (an annual celebration sponsored by the Profit Sharing/401k Council of America) coming up on September 7th, now is a good time to help employees become "retirement ready."

Increasing longevity, overwhelming debt, and rising health care costs can challenge the ability of the American worker to prepare for retirement. Further, employers that offer 401k plans have an obligation to provide employees with education and the tools to help them prepare for retirement.

Workers need help developing the skills necessary to make informed decisions and to take action to improve their overall financial well-being. "Retirement planning now and into the future requires people to effectively manage and reduce their personal debt and provide for family needs like insurance, education funding, and health care planning," said Arnone, Employee Financial Services Leader, Ernst & Young's Human Capital practice.

To help employees become "retirement ready," employers should consider the following initiatives:

  • Educating employees about the value of 401k participation and more contributions;
  • Offering impartial advice to 401k participants to assist them with making informed investment decisions;
  • Providing a bigger financial picture to put all their decisions in perspective and understand how each decision today will affect their retirement tomorrow;
  • Consider implementing the following plan design changes:
    1. Automatic enrollment (with opt-out provision).
    2. Initial minimum contribution of 5% coupled with an automatic contribution increase of 1% per year until 10% is reached (with employee able to change or reduce at normal intervals).
    3. Default option is an actively managed, lifestyle fund, or target fund (no more stable asset or money market funds as the default).
  • Furnish lots of good plan information. Regularly tell your employees about the plan and it's benefits to them. Do this through more than just one medium. Use emails, newsletters, internet, intranet, statements, etc.

The Profit Sharing/401k Council of America (PSCA) is a nonprofit association advocating increased retirement security through profit sharing, 401k and related defined contribution programs. For more information on PSCA, visit http://www.psca.org/.

Rick Meigs, President, 401khelpcenter.com

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