How can we boost 401K participation among employees?
#401K #participation #tips #employeeengagement
### Current Situation
– 17% of employees not participating
– 6% match and vesting after 3 years
– Multiple workshops from Fidelity with generalized and boring content
– Regular communications on eligibility and participation steps seem ineffective
### Proposed Solutions
– Customized workshop with a representative
– Individual meetings to address specific concerns
– Consider auto-enrollment to increase participation rates
### Seeking Advice
– Any tips or guidance on increasing 401K participation?
– What has worked for your company in promoting employee engagement with 401K plans?
– Any creative strategies to make 401K participation more appealing and understandable for employees?
What are the demographics of the 17% who aren’t participating? Are they lower-level employees who might not be able to participate due to their pay? Are they in positions that experience high turnover and maybe don’t participate because they don’t think they will hit the 3 years to fully vest?
My company went to an auto-enroll system. All eligible employees begin contributions at 3% automatically upon hire, unless they opt-out. We don’t get many requests to people to opt-out.
Not everyone is going to participate, especially lower income earners. 83% participation is pretty high IMO, and I wouldn’t push more.
When my folks aren’t participating in 401K plans it’s typically because we haven’t done COL / current market rate assessments in a while. Times are tight and people are struggling to make ends meet, let alone save in most cases.
As others said, you need to review the population. It’s probably your low earners or high turnover roles.
But frankly, a 3-year vesting period isn’t particularly competitive these days.
Auto enrollment and vest immediately or after 1 year.
Auto-enrollment with opt out really makes the most impact.
Many years back I did some education and posted flyers in office for lower wage earners. I made an example of how even small contributions grew over time and how the tax savings created more take home pay.
I offered to chat with any employee that wanted more assistance. That actually helped increase participation.
Not sure if that is still applicable, but it was an entry point.
FWIW if you have over 80% participation, that’s really good!
I’ve had success (and I know it sounds corny) with getting the rep to come in and bring free lunch and give a presentation and sign people up right then and there.
Maybe require a 2-3% match but you may need to pay up for that. It will affect ppl if they see a “loss”. Especially anyone already struggling and lower rungs of the company may see a good amount of people leave. Could also just freely put a certain percent in for them? My company provides 4% automatically and there is also a 4% match after that.
Also 3 years vestment is a long time. Should be 1 year if you want max participation. My company is immediately vested.
If you put in 1-2% for them, and then have one on ones. They can see “their” money growing and might be willing to add to it.
Can’t afford it. And if your population is mostly Millenials and Gen Z, a lot of them don’t even see a point in saving up for retirement, since we’ll likely not be able to afford that, either.
I agree that the vesting period could be a deterrent. My company requires one year of employment before you can enroll, but you are fully vested immediately.
We have about 100 employees and 100% participation from eligible employees. A lot of that is due to our match, but we also work with a local investment advisor and do regular virtual meetings tiered toward different age groups within the company (21-39, 40-59, 60+). I think the targeted topics get more interest from our employees. We also offer the advisor’s services free to any employee, so they can meet individually or with their partner and get guidance with consideration for their personal circumstances.
We have an auto-enroll at 3% they can opt out of. Our max match is 4%. We have a 96% participation rate, and almost everyone who was auto-enrolled opted to go up to 4%. We do not have a vesting schedule, it is automatically vested at 100%.
Our demographics include lower wage blue-collar employees.
We do automatic enrollment at 3%, vesting after 1 year and 50% match on first 6%. We have 97% participation. I really think the automatic enrollment is key.
Take a look around and ask yourself if anyone has the extra money to put away for retirement
I think HR having meetings (in-person or virtual) to discuss the process would be helpful. Just sending someone an email that’s going to get lost isn’t doing much. I think personalization is important so people can understand why thinking about retirement is important. Are the tax savings being brought up? Obviously they’ll pay tax later, but that’s something to discuss during the meeting. Is the 401(k) brought up when onboarding new hires?
I agree with others that auto-enrollment with opt-out is your best bet to increase participation. What is the board or finance committee doing/thinking to increase participation? What kinds of funds and what are the returns on the funds offered by the plan?
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We default everyone into 401k on hire and they must waive if they don’t want it.
At one of my previous companies which did have a lot of low level employees, we did auto-enrollment at 3%. There wasn’t a match, so no vesting was required.
Auto enrollment helps. That being said, have you considered the fact that they simply can’t afford it?
Yes! Amend your plan for auto enrollment. We auto enroll at 6% and have a 96% participation rate
3 years vesting isn’t very attractive
Put up a sign for free money. I did this at a store and told them to ask me how. So we sat down and looked at withholdings; typically at 3% you can’t see a difference in your paycheck. With a couple of people I made ‘bets’ of lunch and stuff if my math was wrong. A few years later one associate found me and tapped me on the shoulder. I turned around and she gave me a hug and told me because she signed up for her 401k she had crossed the 50k mark and was excited about her future. Makes it all worth it.
I am going to agree with the auto enroll suggestions. Our company has a ridiculously long vesting period for our match, but because we auto enroll, our numbers are way up. We have a 94% participation rate.
3 year vesting? That may be the issue.
Auto enroll program (with option to opt out; different percentage between hourly/salaried) and auto increase program (1% per year) to promote both engagement and increasing deferrals.
We do auto enroll after the second paycheck I think. If they want to opt out, they physically have to do so and we enroll them at 6% so that they get the maximum match.
People
Aren’t
Being
Paid
Enough
As others have said, the 3 year vesting is not very competitive. However the 6% is quite good!
I would have you think about the match in connection with (1) turnover rates — how many people will stay 3+ years? and (2) what is the age of your workforce?
Both of these factors would decrease the value of your attractive match. Maybe you could back into a figure you think about as the “employee value” which will be lower than the 6 percent.
Good luck!
Make it vest faster. These guys don’t see themselves in the role that long imo.
Wages must be higher than cost of living in the area.
I do my own retirement investing. If I didn’t have a match or it took a long time to vest, if there wasn’t a low limit, I’d max out an HSA first.
Thank you to everyone for the great advice and ideas! Much appreciated.
Do a demographic study as the folks who do not participate may be in similar cohorts such as role, department or wage range. Also, 3 year vesting period is not attractive.
What is your participation goal and why is it that % (whatever it is)?
Do you match 100% of the first 6%?
Have you thought about lowering your vesting schedule?
Who isn’t participating? Low earners? Hourly staff?
The bottom line is that auto-enrollment is the way to go if you want more participation because lots of people are too lazy to opt out so they’ll just deal with the adjustment, but you need to understand the “why” behind the information available to you if you truly want to cater to people and get them interested in the 401k.
auto enrollment for all new hires and need to offer immediate vesting if you want more participation.