Build it, and they will come.
Although this worked in the 1989 movie Field of Dreams, it is not as likely to work with your company’s 401(k) plan. Nonetheless, participation is crucial to not only your plan’s success, but also employee retention1.
In the report “A Compendium of Findings About American Workers2” respondents were asked why they chose not to participate in their employer’s 401(k). The top three answers were:
- I didn’t have enough time to enroll (40 percent)
- I don’t earn enough money (33 percent)
- It is too much of a hassle to enroll (19 percent)
These concerns, as well as others, can help you determine what to do to address low participation rates in your own company.
Of course, if your employees do not know about the plan, they will not be able to make a choice to participate in it. However, not all communication is created equally. Here are a few things to consider as you communicate to your employees about your 401(k) plan:
- Use a variety of communication mediums including emails, websites, newsletters, statements, meetings, flyers, video, apps, and more.
- Be sure that the right communication is going to the right employee. For instance, 55-year-olds are more likely to want information on fast-tracking retirement savings rather than saving for a first home. Research3 has shown that personalized statements increase participation by 6 percent and increase contributions by 0.85 percent more of their salary.
- Communicate often. Quarterly information about financial matters increases participation rates by 4 percent over those who communicate less often.
Employee Financial Wellness Education
In a recent case study with an Enrich client, 34 percent of employees who engaged with the financial wellness campaign increased their 401(k) participation rate.
- Provide individualized information based on each employee
- Use various methods of communication
- Have a wide array of methods for learning including videos, games, contests, tools, calculators, spreadsheets, etc.
This education should provide your employees with the information needed to understand their finances, including how the company 401(k) is a tool to help them meet their retirement goals.
Employees are more likely to participate if they understand the benefits of doing so. Financial wellness education can teach employees the importance of participating, which can be emphasized by employer communication. A comprehensive financial wellness program will teach how a 401(k) plan can:
- Lower taxable income
- Permit direct deferrals in any combination of before or after tax as long as they don’t exceed IRS limits
- Provide tax-free growth