A recent survey found that 59% of workers thought that they were contributing to their 401(k) plan and saving for retirement when they weren’t.
The Retirement Security Survey, conducted by Principal, asked participants why they weren’t enrolled in the plan and a surprising number thought they were. Even though plan provisions such as automatic enrollment and employer matching have a positive effect on plan participation, communication can also be a powerful tool.
The Department of Labor (DOL) and Internal Revenue Service (IRS) require a variety of information be shared with plan participants, but some eligible employees can be intimidated by the language in the material and decide that participation is too complicated. Others believe they are automatically enrolled in the plan because they were auto enrolled at a past employer.
If possible, one-on-one meetings are a great way to make sure that an employee understands what is being offered. When an employee is hired, they may receive an email with multiple files attached, including instructions to log onto a website and enroll in the 401(k). Starting a new job is often overwhelming and enrollment can be overlooked.
Enrollment meetings involving both Human Resources and the plan’s investment advisor are a great way to boost communication and participation. Taking the mystery out of available investment options, as well as showing the financial benefits of saving for retirement, helps the participants feel confident in their choices. Enrollment meetings can be done in person or by video meeting, depending on the location of the employees.
If it’s available to you, a retirement readiness report will show each participant their retirement age, current balance, current deferral percentage, current income and what retirement will look like for them. It can be quite an eye-opener for many participants.
Communication is the key to successful plan participation. It also helps your participants have a more positive attitude toward your retirement plan and their retirement future. Feeling like their employer cares about their future leads to a higher level of job satisfaction and feeling appreciated.
This newsletter is intended to provide general information on matters of interest in the area of qualified retirement plans and is distributed with the understanding that the publisher and distributor are not rendering legal, tax or other professional advice. Readers should not act or rely on any information in this newsletter without first seeking the advice of an independent tax advisor such as an attorney or CPA.
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