5 Tips to Boost 401(k) Participation

June 25, 2016 by David Ramirez

Humans have a lot of trouble saving for retirement. No surprise there.

But if we look at the retirement savings problem another way, turns out a large part of why it’s hard to save is because most 401(k) plans are too hard to join.

Yes, there’s a fair amount of procrastination, hand wringing, wondering how much to save. But most of that stops the moment your employee makes their first 401(k) contribution. Once in, people do a pretty good job of staying enrolled and saving.

Which is why every HR leader and CFO knows that high 401(k) participation rates are hallmarks of top 401(k) plans. So how do successful business leaders boost their employees’ 401(k) participation?

Here are 5 tips that you can use to encourage 401(k) participation at your company:

1. Create a new status quo and automatically enroll everyone into the plan.

You finally chose a 401(k) provider, and found one that isn’t charging an arm and a leg in fees. Plus, your provider’s sending advisors out once a quarter to educate employees, explain the funds, and discuss retirement goals.

There’s one problem. Nobody’s in the plan.

Even worse, all of the work you go through to offer people the 401(k) plan goes down the drain pay period after pay period.

Your answer: automatically enroll employees into the plan the moment they’re eligible. Companies that automatically enroll employees see over 90% of employees stay in the plan.

And economists and 401(k) experts are so excited about automatic enrollment, there are murmurings that there will be a bill in front of Congress in 2018 to mandate automatic enrollment in 401(k) plans.

2. Make it super easy to take action.

Making a change to your 401(k) plan shouldn’t take more than a single push of a button. Want to change your savings rate? No more than two clicks. Want to put 100% into a Target Date Fund? Two clicks. Want to see how much you’ve saved up in your 401(k)? One click.

Without a way to quickly and easily take action, many employees will fail to implement their best intentions and likely stick with a low savings rate.

If your 401(k) provider has a clunky experience, here are a few ways to get around that:

  • Send employees information the moment it’s ready and while it’s still fresh on everyone’s mind.
  • Prominently link to the direct login to your 401(k) provider on your company’s intranet and in each benefits email.
  • Automate text messages to your employees with changes to the plan or enrollment opportunities. (Super helpful if your employees aren’t always sitting behind a computer, checking email.)

3. Celebrate the small moments.

Delight employees for high 401(k) participation

More than a little goofy, and absolutely cheesy, but turning a new (or improved!) 401(k) plan into a party will pump everyone’s brains full of warm fuzzies. One treat that we’ve found works is sending each of our customers a #401cake. (And we sit anxiously at our desks as we wait for the silly, happy photos of teams roll in.) After all, what’s a cake but a simple bite of sweetness and delight.

By celebrating each small step, our brains will attach more and more positive feelings as we hit our goals and save for retirement.

4. Explain the 401(k) plan in terms that everyone gets.

The dirty secret about financial services communication is not that financial advisors, banks, and insurance companies hire terrible product marketers that are part robot, part dictionary. Nope, they’re confusing on purpose. Not knowing how much you’re paying, a confusing fund line up, getting only a fuzzy picture of how much work you’re expected to take on yourself — any one of these will drive down 401(k) participation, and make you less effective in managing the plan.

That’s why great 401(k) plans breeze in like a breath of fresh air with their jargon-free, simple communication.

As an example, here’s one communication we’ve developed that seems to do the trick (just turn up you speakers and click the play button).


You probably noticed a few things. About every thirty seconds or so, we ask the employee to answer questions which often determines what we talk about next. We put the employee in the driver’s seat, providing them just the right amount of information to make a smart decision.

In short, people respond to 401(k) communication that is filled with empathy and meets them where they are.

Unfortunately, there’s no easy fix for this one if your current 401(k) material is confusing. You can ask your provider to come up with more clear communication, but that can take months and may not even happen at all.

There are some 401(k) resources to get you started, if you want to translate the material yourself. But you might be better off directing your employees to schedule time with your current 401(k) advisor and get 1:1 help.

5. Turn everyone into a saver by automatically increasing savings rates.

Always focused on helping employees save for retirement, high-participation rate 401(k) plans raise the bar even higher by also automatically increasing employees’ savings rate by 1% each year.

By turning on auto-escalation, you’ll turbo charge everyone’s ability to save by starting them off at a manageable rate (we start people off at 6%), and having them save more and move over time without having to do a thing.

And the beauty of saving the extra 1% year after year, is that in just a short amount of time you’ve built up a great habit of putting money away for the future. In a few years your employees will thank you as they get to see the benefits of saving more.

Of course, there are other examples beyond just these five. But taking on these five traits gets you over the highest hurdles when it comes to saving for retirement: joining the 401(k) plan and saving at a meaningful rate. While a lot of the 401(k) experience is determined by your provider, there’s still a lot you can do to empower employees to join and make the most out of the company benefit.

Want to see how we get 88% of employees to participate? Let’s talk!

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David Ramirez

David Ramirez

David is on a mission to help every small business owner offer a 401(k) that rivals the largest Fortune 500 retirement plans. To say David is frugal is, well, an understatement. So as a founder and Chief Investment Officer, David spends his time doggedly using the combined purchasing power of our clients to get ever better services at ever lower costs. And David has a pretty good idea of how awesome and inexpensive 401(k)’s can be. Prior to founding ForUsAll, David helped manage over $55 billion in assets for employees at large Fortune 100 companies. David holds a CFA charter and a B.S. in Political Economics of Industrial Societies from the University of California, Berkeley. When not working, David swims, writes bad haiku and moonlights as a ceramicist. David has no plans on retiring - but will likely make a career shift later in life to dedicate himself fully to creating the perfect teapot.
David Ramirez

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