Lisa expressed concern about her employees’ low participation in the company’s 401(k) plan. “I’m just puzzled. We offer a generous match and we offered educational sessions about the plan’s benefits. I’ve done everything by the book! Why aren’t more employees taking advantage of our 401(k) plan?”
“It’s more common than you’d think,” I told her. “A recent survey exposed some surprising reasons employees opt out of 401(k) plans. Many don’t participate because they feel they can’t afford to contribute, don’t understand the plan, or are overwhelmed by the investment choices. Employees need to feel confident and capable of participating.”
“What can we do about this? It’s a good benefit our employees should take advantage of.”
“Let’s start by setting up automatic enrollment with a default contribution rate. Employees can opt out if they choose, but most won’t. This reduces the inertia that prevents participation.
“Let’s also review your education programs; many of them backfire. Straightforward, jargon-free workshops will explain the benefits of the 401(k) plan and the impact of compound interest on retirement savings.”
Lisa smiled. “That makes sense so far. What else can we do?”
“Provide personalized guidance. Offer one-on-one sessions where employees can discuss their financial situations and receive tailored advice. And that will help them feel like the company actually cares about them.
“And it never hurts to simplify investment options. Offer a small selection of diversified, low-cost funds that make investment decisions less daunting.”
A few months later, Lisa reported a significant uptick in participation rates. “It’s amazing,” she said. “Once we made the process easier and offered meaningful support, employees felt comfortable joining the plan.”
Simply providing a 401(k) plan isn’t enough. If your employees aren’t participating, the solutions might be simple. Ask the experts at Concierge Retirement Planning for smart strategies that will get your team on board.