Are Your Employees Aware They Can Participate in the 401(k) Plan?
How is the participation rate of your 401(k) plan? Are your employees alerted when they are eligible to participate in the plan? How about long-term employees that have chosen not to participate in the plan in the past, but may participate if they are reminded?
These are some of the questions you should be asking yourself if you are the plan administrator of your company's 401(k) plan or work directly with new hires and long-term employees on an ongoing basis (like the human resource department, of course). Many new hires may opt not to participate in the plan on the first day of orientation or when they are alerted after meeting the eligibility qualifications of the plan. If the plan does have a term of employment to be able to enter the plan (for instance, 1 year of service), perhaps adding an enrollment form to their annual performance review would assist in increasing the participation rate (or whatever other means you could sneak a a one-on-one meeting to go over the plan and the benefits of participation).
As for long-term employees, are they being reminded of the plan and the benefits of participation? Like I said before, just because they did not sign up on the day they met the eligibility requirements does not necessarily mean they wouldn't at a latter date. Perhaps posting signs that are in highly visible places, like a break room, will assist in spreading the word? Maybe in the next staff meeting mentioning the plan and offering to speak with any employees after the meeting to go over the benefits of being part of the plan?
Over the past decade of auditing 401(k) plans, it amazes me to see how many plans have such low participation. Many, of course, relate to high turnover in a particular industry. I get it, but why not continue to offer such a great benefit to those that need to start planning for retirement? Time is of the essence when it comes to retirement planning and a big piece of your employees' retirement planning could come from you.
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