Studies have shown that employers who offer their employees benefits and perks are viewed more favorably than those who do not. Most employees also understand that benefits are part of their total compensation package. In other words, it’s not just the salary you pay, but the value of the extras such as insurance, PTO, and retirement plans that employees include when they consider what they get for the work they do. However, employees who fail to utilize a benefit are often wasting an employer’s money and their own opportunity to realize the full value of their compensation package.
When an employer promotes their benefits and encourages participation by employees, it goes a long way to show the employer cares. 401(k) plans often need more prodding than benefits like health insurance. Often employees feel like they can’t save now for retirement or they don’t see the need. Beginning to save as early as possible and continuing to save throughout their working career is vital in order to fund retirement.
But how can an employer up the participation in their 401(k) plans? Here are 5 steps to get you started, provided by our content partner, Zywave!
Offer some financial education.
Bring a financial advisor or representative from your 401(k) administrator to provide employees information about the importance of saving, the concept of compounding, how much they’ll likely need to live comfortably in retirement, different investment options and how just a small amount from each paycheck can make a significant difference.
Make sure employees understand your plan.
Investing in a retirement plan is confusing, and your communication strategies should make it as clear as possible for employees. If they don’t understand, they are more likely to make poor investing decisions or not invest at all. Employees should know if you offer a match (and how much you offer), the types of investments they can
choose, fees associated with the plan, penalties for early withdrawal, vesting requirements, loan or hardship withdrawal options and all other relevant details. Consider providing written flyers or brochures, online or email communication, group meetings and one-on-one consultations.
Offer target-date funds.
These funds are a great option for employees with minimal investment savvy or who don’t want to manage their investment options on a continual basis. A target-date fund holds an array of stock, bonds, and other investments, with the balance of risk becoming more conservative as retirement age nears.
Consider automatic enrollment.
Often, employees realize they should enroll in the 401(k) plan but just don’t take the time to do so. Automatic enrollment will give them the push they need. Also, it is a benefit for new hires because they are enrolled as soon as they are eligible, so they likely won’t miss the percentage deducted from their paychecks if it begins right away. Employees do have the option to change their contribution amounts or opt out of the plan if they choose.
Offer a match if possible.
Offering a 401(k) match is a great way to encourage employee participation. If you do offer a match, let employees know that not investing themselves is leaving free money on the table.