How to Increase Employee 401k Participation
It is the age old issue of how to increase employee participation in your 401k plan. We know how crucial it is to the overall success of the plan -- particularly to the highly compensated employee group. High participation also helps in creating a positive attitude towards the company and helps greatly in employee retention.
So, how can you increase participation in your plan? All major studies show a 401k plan is more appealing if you:
When it comes to getting your employees to participate in the 401k plans, personalized employee communication can go a long way, according to Watson Wyatt's latest 401k Value Index™ research. In this era of "big data," few recordkeepers will have a problem generating personalized communications material.
The research reveals that employees who receive personalized statements contribute 0.85 percent more of their salary to the 401k plan on average, compared with employees who don't receive this information. This can mean a significant difference in retirement savings.
Furthermore, companies that use personalized statements to inform employees about their 401k plan have an average six percent higher participation rate compared with those that don't. The survey also shows that employers that communicate at least quarterly on such issues as the principles of the time value of money have a four percent higher employee participation rate than companies that communicate this information less frequently.
As a plan sponsor who is concerned about employee participation, you should always attempt to personalize any employee communications about the plan. This includes enrollment materials and other forms of communications. For example, if you are providing enrollment material to a group of new employees who are in their twenties, the ideas and data should be target to their life circumstances. To often generic material and we just hope they get the message.
"The results of the survey confirm our long-held belief that targeted communication is one of the best ways to change employee behavior and enhance a 401k plan's value," says Greg Metzger, director for defined contribution consulting at Watson Wyatt. "Many employers underestimate the importance of communications in helping employees make the most of their retirement plan."
Remember, you will always have some of your employees who won't participate in your plan regardless of what you do. The key is to maximize usage of your plan by those who will participate.
A variety of worker concerns, as well as other factors, could be affecting the participation and retirement readiness of the employees of your organization. Here are a few ways you can address common concerns and increase plan participation rates.
This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.