Differences In Employer and Employee 401(k) Plan Perception

For millions of employees, 401(k) plans are the cornerstone of their retirement funds. For employers, the retirement plan is the main benefit they offer their workers, other than health insurance. Despite the importance of the plans to both employers and employees, results from a recent Fisher Investments 401(k) Solutions survey reveals sharp differences in how the two groups perceive retirement plans and the information available about them.

Our survey revealed employers believe they (and their providers) are giving employees the information they need to make sound decisions about their retirement accounts. However, many employees seem to know little beyond the 401(k) basics, and generally are not as positive about their company-sponsored retirement plans as their employers seem to think. These differing views on retirement plans have consequences for both employers and employees.

With college graduates entering the job market for the first time this summer, 401(k) plan providers have an opportunity to close the gap. Aiding employees in gaining a greater understanding of the 401(k)s they offer—as well as helping employers get credit for plan benefits they're providing—can help to align the value of the plan for both employees and employers.

Key survey findings show the different perspectives employers and employees have about retirement plan attributes:

•    81% of employers think their 401(k) adviser provides employees with needed financial education, and only 57% of employees agree.

•    78% of employers believe their employees have access to one-on-one financial guidance from their 401(k) provider compared to only 56% of employees.

•    The need among employees for more information about 401(k) plans was underscored by the finding that 71% of employees failed a basic 401(k) quiz, missing more than three-out-of-nine questions.

For younger employees, who were more likely to feel overwhelmed or unsure of how to find the right information about their retirement plans, the failure rate on the basic 401(k) quiz was significantly higher (84%) compared to baby boomers (55%). For both younger and older plan participants, the lack of retirement plan knowledge carries immediate emotional consequences: more than 80% were concerned about running out of money in retirement. What’s more, only 50% appear satisfied with their plans’ main features.

The survey leaves no doubt that retirement plans have a major impact on how employees perceive their employers: Three-quarters of employees (77%) believe that employers who offer plans show that they care about their workers. And employees believe that strong plans help bolster their loyalty to a company (66%) and, by a smaller majority, also serve to motivate them in their jobs (53%). Clearly, employers whose workers are not confident about their retirement plans risk staff turnover, and risk hurting their ability to recruit talent and stay competitive, at a time of low unemployment.

It’s clear employees are looking to their employers—and by extension the 401(k) partners their employers choose—for help understanding how much they should be saving, which investments they should be choosing, and more.

Without this knowledge, they may find it difficult to save into the 401(k), no matter how motivated they may be.

All this points to the greater role 401(k) plan providers, like Fisher Investments, can play for employers in educating employees about the benefits of their plans and closing the perception gap revealed by the survey.

Visit Fisher401k.com to learn more about the detailed findings of our 401(k) Wellness in the Workplace survey, the How Business Choose the Right 401(k) Plan and Provider for their Business Report, and see if you can pass the 401(k) Knowledge Quiz yourself.

 

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