5 Tips for a Successful 401(k) Enrollment
posted by Fisher 401(k) November 21, 2017
401(k) enrollment provides an opportunity for employees to get started with saving for retirement. With the right support, your employees can sign up for the plan, update their savings rate, make some good decisions about how much to save and which investments to choose, and get on the road to the retirement of their dreams. More than that, though, the period leading up to open enrollment provides you an opportunity as the employer managing your plan to re-evaluate your plan, your provider, and the support available to help employees engage with their retirement plan.
As many companies are well into open enrollment season for both their health benefits and retirement benefits, we’ve collected these five tips to help you take stock of your plan and maximize both the value you receive from your 401(k) service provider and the value your 401(k) plan can offer.
1. Schedule your 401(k) service provider for regular on-site meetings with your employees
Talk to your provider about them taking an active role in helping your employees to understand their 401(k) plan and the benefits of enrolling through one-on-one meetings. We’ve found that these private sessions can make it easier for people to ask specific questions that might not be answered in group enrollment sessions, and can help empower them to make decisions that support their unique goals for retirement.
2. Remind your employees of the 401(k) support and services available
In addition to these one-on-one meetings, remind your employees about the other forms of support and financial planning tools available to them through your service provider. These can include things like:
Educational materials about investments and other 401(k) topics
After enrollment, ask your service provider to conduct an outreach campaign to those employees who haven’t yet enrolled to remind them of these resources and make the resources easy to find and use.
3. Explore plan features that can encourage more saving and participation
Ask your provider to offer some reports and insights into how your plan’s participation rates compare with other, similar plans. If it turns out that your plan’s participation rates are lower than the average suggests they should be, you might consider adding some plan features that can help to increase enrollment and savings rates.
Auto enrollment: This feature will automatically enroll eligible employees at a pre-determined contribution rate chosen by the employer, usually around 3% to 4% of the employee’s compensation. Employees will be able to opt-out of enrolling if they prefer, but auto enrollment is a great way to automatically increase overall plan participation across the board.
Employer match: There are many ways to implement an employer match into your plan, which allows you to offer contributions to match those your employees choose to make. You can incent employees to participate by offering a dollar-for-dollar match up to a certain percentage of the employee’s salary (say 5%), for example. Or, if your goal is to increase overall savings rates, you can choose to match 50% of employee contributions to a higher percentage (say 10%).
Adding features like these to increase participation rates can have an extra benefit, too: Higher participation rates generally make it easier for your plan to pass annual compliance testing, and may also allow you and your highly compensated employees to contribute the maximum allowed for personal retirement accounts.
4. Review the plan's investment options
It’s a good idea to regularly check in on certain fundamental aspects of the plan to make sure they’re still the right fit for your evolving workforce. One part of your plan you can review leading up to enrollment is the investment lineup available.
Ask for an investment report: Ask for an analysis of your investments by a respected, unbiased provider. We at Fisher Investments 401(k) Solutions partner with FI360 in order to offer our clients an unbiased view of their investment performance compared to other, similar options. This information should help you spot investments that aren’t performing well and should be moved out of your plan. If your adviser is a 3(38) Investment Manager, they will take care of all of this on your behalf. It is part of their fiduciary responsibility to review, monitor, and update your plan’s investment lineup regularly.
Consider investment options: Next, talk about the specific needs of your employees and ask your provider for recommendations to make it easier for your employees to choose an investment strategy that’s right for them. Your plan should include investment options for those who would prefer to have their investments selected for them, options for those who want education and guidance, and options for those who want to make their own investment decisions. A one-size-fits-all investment strategy can be intimidating to some, and not hands-on enough for others.
5. Understand your 401(k) plan's fees
Finally, take this opportunity to talk to your provider about the fees associated with your 401(k) plan. Fees can be difficult to understand, but if left unchecked, they can take a huge bite out of your employees’ retirement savings over the years. As with your investments, ask your provider for a simple and transparent report of all the fees being paid both by you and by anyone participating in the plan. This report should include comparisons to industry average fees so you can see if anything doesn’t line up. For more information about fees and how to tell if your plan’s fees are reasonable, read this article about monitoring 401(k) fees.
Set Your Employees Up for Successful Retirement Saving
In our experience, it’s well worth it to take these five steps each open enrollment season to make sure your employees understand their plan, and are also getting the best value possible. In fact, we’ve found that when employers partner with us to offer this level of individual enrollment support, our clients experience a 63% increase in participation rates. Lean on your provider to offer one-on-one support, plenty of educational resources, the right plan features, strong investment choices and reasonable fees, and give yourself and your employees the best opportunity to save for retirement.