Low-hanging Improvements Available to All 401(k) Plans
Improving 401k participation rates is a challenge for every Human Resources Director, Communications Officer and most Retirement professionals. Offering the very best 401k plan, or any benefits package, carries no value if the employees are not participating!
Delivering Fiduciary Education Programs across the country with The Plan Sponsor University gives one perspective. A tremendous amount of education occurs within and during a Plan Sponsor University Program and the learning that occurs can be described as a two-way street. When discussing What is Working in today’s 401k Plans the topic of improving 401k participation rates is frequently brought up by fiduciary and trustee attendees. That alone is no surprise. What is a surprise is how simple, inexpensive and successful some of the ideas have been.
Start at the Beginning – Attracting the 401k Plan Participant
During a recent TPSU Program in the southeast a Human Resources Manager described how her organization viewed the 401k. Their company feels so strongly about their 401k benefit that within every Offer Letter that they prepare for each potential new employee, they proudly refer to the Automated 401k Benefit. They follow that reference up with, “you will be automatically enrolled in our 401k Benefit program designed to prepare all of our employees for your retirement.” This small change measurably contributes to the number of new employees who accept the auto enrollment feature upon being hired. The creative thinking at this company does not stop there.
Take note, within her organization employees always refer to the 401k Benefit Program, instead of the 401k or the 401k plan. The reason for the attention-to-detail in the language used was simply described as, “referring to the 401k using the U.S. Tax Code or as only a plan, fails to reinforce that the 401k is truly a fantastic benefit at her organization!” She elaborated that her company spends a substantial amount – described as time, money and human capital on this benefit…and it is so much more than a “plan.”
A Change in How We Communicate
Not too long ago TPSU Program attendees on the west coast were schooled by an attendee who shared a story of combining segmenting and technology among their workforce. The company noticed that they had great participation within their 401k benefit program at all levels with the exception of the under 35 Gen-Y demographic. Participation at that level was described as abysmal. After spending significant dollars and a substantial amount of time on print programs and lunch-and-learn efforts, the company resigned themselves to the fact that nothing was working, they were not connecting with this group and the organization somewhat ‘threw up their hands.’ In an effort to insulate the company from legal ramification into the future, management decided to make 3 different, three-minute videos to be posted on the company website. Again, the primary purpose being building a solid defense for future plaintiffs who might claim they had no retirement savings and no knowledge of a company sponsored retirement benefit. The outcome is predictable but the numbers are astounding. The videos went viral within the organization. Within 2 months, over 50% of the previously non-participating Gen-Y crowd was deferring into the company 401k benefit program.
These are just examples of how individuals focus on improving 401k participation rates at TPSU Programs. Improving 401k participation rates can be achieved and many times measurable results come at a very low cost.
