five ways to engage more employees in your 401k plan 2

As employers prepare for open enrollment season, those wanting to boost participation in their 401(k) plans should act now to deploy strategies that work.

Helping more people access retirement planning is a noble cause, especially when you consider 30 percent of eligible employees do not participate in their employer’s 401(k) plan. Sad to say.

Given the many savings and tax advantages of these plans, one would expect 100 percent participation.

What’s the problem?
Better yet, what’s the solution?

Well, the answer to the first question is bit complex. And it involves the expanding field of behavioral finance, too hefty for this quick post.

My goal for this post? Simplify the complex for you and your employees.

That’s why we will not discuss reasons why only ten percent of employers with fewer than 100 employees offer a 401(k) plan, at all. And I will not tackle why eligible employees who do participate don’t save enough. Or why employees need to resist borrowing from their 401(k) plans.

Two reasons drive one-third of workers to shut themselves out of at least some retirement security: 1) The process seems complicated, and 2) humans tend toward short-term thinking.

It’s Complicated

In a useful survey from AARP, more than half of adults said they had made an investment with an adverse outcome because they “didn’t understand” the investment, which negatively affected their appetite for saving into a retirement plan. It turns out the adverse outcome was based on unexpected taxes or a penalty on early withdrawal─easily overcome had these consequences been communicated clearly and early on.

But here’s the rub. Of those surveyed, 54 percent admitted they “don’t read financial literature because it is too hard to understand.”

Paycheck to Paycheck

five ways to engage more employees in your 401k plan

In another study by the Social Security Office of Policy, we learn that short-term goals have a negative impact on participation rates. The study establishes that employees’ planning horizon matters. For example, those who “plan for periods of less than five years are much less likely to provide for their retirement than those who have a longer perspective.”

Do you see what a challenge these realities present for everyone in the retirement planning business? Then, add inertia to the challenge. Given the option to do nothing, most people will do nothing, even if the choice brings good to them.

It is extremely difficult to change someone’s opinion, let alone change their behavior. However, we must try. We have an obligation as good stewards of retirement planning to give employees every conceivable opportunity to retire with dignity.

As an employer offering a 401(k) plan, you took a major step forward in the retirement challenge. Now, let us work with you to help you engage more of your workforce in your plan so they can realize the long-term benefits of the plan you’ve so generously provided.

Here are some simplified strategies you can put into play to help your company experience a successful enrollment season. And keep in mind, we want to minimize fears and misconceptions around 401(k) plans.

Five Ways to Increase Plan Participation

  • Keep it Simple. Be sure to announce and communicate what needs to be done, why and when as simply as possible. Don’t overwhelm your employees with financial jargon, busy charts, too many details or too many choices. Share as much as possible in as few words as possible. Make the message clear, concise and compelling. Appeal to the emotion. Share how the plan protects the employees and their families. Use beneficial imagery.
  • Tailor Your Communication. Employees respond differently to different messages. Where email works for one group, formal written materials may work best for another. Some like the visual reinforcement of seeing posters or flyers in public areas, or postcards to their home. Create multiple communication platforms to get the message across.
  • Implement Auto-enrollment. Even with automatic enrollment, employees still can choose not to join the plan. However, they must proactively opt-out, lessening the possibility of non-participation. And because auto-enrollment typically offers default choices in savings rate and investments, it makes it easier for employees to make a decision, free from a dizzying array of choices. At least, they are saving. Good news. The DOL estimates auto-enrollment alone can slice the number of those not participating in half, from 30 percent down to 15 percent.
  • Partner with Technology. It’s imperative to give your team 24/7 access to plan information. So put it online and make it interactive. Don’t preach. Teach. You can use any number of human capital management systems so employees can make easy adjustments to their plan. Some offer employee personas or profiles where your worker chooses a profile most like them, a type of self-qualification. Then you can match relevant content to their needs.
  • Do Creative Marketing. Face-to-face engagement in the plan offers participation incentives. In this age of digital distances, some folks still enjoy good, old-fashion human contact. Think Focus Groups, Lunch and Learns, and Benefit Fairs. Generate excitement. You can even go virtual with these types of events. Simply get creative and enjoy the journey. Today’s savvy HR departments know how to do these events well. If you don’t have an HR department, talk to us. We can guide you.

I could share 50 more ways to increase your plan participation; this whirlwind post only touches the surface. However, if you do these five things I’ve suggested, you’ll feel a tailwind at your back and head in the right direction.

In the meantime, talk to us about any special challenges you face. And remember, you can always outsource full 401(k) plan design, implementation and administration (including employee education and communication) to a specialty firm, like ours.

Ask us about our innovative DCPro program, which brings together in an exceptional alliance the best of the best plan fiduciaries in the business.

To Your Financial Freedom,

rick roush

Rick Roush AIF®, CPFA

Roush Investment Group

O: 559.579.1490 F: (559) 490-2015 C: (559) 285-3318