401(k) plans remain a strong essential workplace benefit, as you well know. As plan sponsors see other benefits evolving to meet the more complex scenarios presented by the changing economic climate, they are emphasizing the need for a competitive plan with a range of features to meet the evolving financial needs of a diverse workforce.
So what exactly does that look like? What range of features can make your 401(k) plan stand out among other retirement benefits that might entice your top talent to stick around?
Employees are more likely to participate when the plan shows evident strategy and thoughtfulness in its design. Features such as match, profit sharing, and Roth encourage enrollment because it allows a participant to feel closer to their entire paycheck.
If you’re matching 5% or more, you’re going to see significantly higher participation rates. If you’re matching at 3%, it can still feel like a warm benefit. 2% and below feels a little like the company could take it or leave it, and that will be how the participant feels about the benefit—and possibly their long-term status at the company.
Autoenrollment points them to the benefit. Automatic employer contribution increases the value of the benefit. Automatic escalation raises awareness about the power of savings (and compounding). Automatic reenrollment reminds them of the benefit in case they waived contributions early on and might like to reconsider after becoming more established in the company.
How do you feel about your education program? Do participants have access to an advisor? When there is a financial advisor available and involved, participation goes way up.
Morgan Stanley at Work’s full Plan Sponsor Research Results 2022 is chock full of insightful charts and data that can give you more ideas on how your plan design can boost your attraction and retention rates.
Source:
TCGIAS.2023.25
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