The Key to Better Plan Participation? Communicate.

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By Jennifer Bassett, QKA, CIP, CISP, CHSP

The phrase, “If you build it, they will come,” may be true for many things, but it’s usually not true for retirement plans. Just offering a plan isn’t enough to get employees to participate. Employers must convince workers—preferably before the plan is established—that participating in the plan is in the workers’ best interest. To do this, employers must develop a positive, consistent, and understandable employee communication program. 

According to the U.S. Bureau of Labor Statistics’ National Compensation Survey, 64 percent of private industry workers had access to a defined contribution plan in March 2018.* But only 47 percent of those workers actually participated in a plan. Clearly there’s room for improvement when it comes to increasing employee participation.  

If your business model includes offering retirement plans for employers, you can serve as an information resource for improving plan participation, which can help cement relationships between those employers and your organization. 

Motivate Employees to Participate 

Several factors, such as tax savings through deferrals and attractive employer matching contributions, can encourage employee plan participation. In addition to emphasizing these factors, employers should be sure employees understand that all of the contributions they defer into the plan will remain their dollars—that employee contributions cannot be used or claimed by the employer. Employers can also encourage employees to participate by explaining how easy it is to save for retirement through an automatic payroll deduction process.  

Create an Employee Communications Program

A solid communications program not only helps inform employees of plan benefits, but encourages participation. The following describes a model 401(k) plan employee communications program that employers may adapt to their own specific workplace environment and demographics.  

Provide an Employee Announcement Memo

Employers should distribute a memo (ideally before the plan’s effective date) informing employees about the retirement plan. The memo should highlight and explain important features of the plan in an understandable manner. This is the perfect opportunity to “sell” employees on the plan and to encourage maximum participation.  

Often, service providers to a plan can provide material that gives a general explanation of plan features, benefits, and operations. A number of commercial vendors also provide such material. Employers should distribute this plan information to workers when the plan starts up—and any time they have a question about the plan.   

Communicate Information on Website or During Employee Meetings 

Providing plan information through the company’s internal website is an easy way to reach employees. Although employees may be able to find most answers to their questions online, they may need more in-depth assistance. Resources permitting, employers should think about offering live chat sessions on their internal websites, or holding an employee meeting each year—or more often—to discuss the retirement plan. Instead of taking these tasks on themselves, employers could collaborate with a financial advisor or an outside benefits enrollment company. They may be able to provide more in-depth, thorough explanations of plan eligibility and contribution features, investment options, and other important facets of plan participation.   

Posting contact and information options in common (public) areas frequented by employees is also a simple yet effective way to open lines of communication. 

Conduct Individual Meetings 

Taking the extra step to meet with each employee can go a long way toward increasing plan participation. The individual or team responsible for maintaining the retirement plan should meet with interested employees to discuss issues such as deferrals, investment selections, benefit projections, and beneficiary designations. These meetings should be tailored to each individual employee’s needs, using specific examples as applicable.  

This completes the model employee communication program… or does it? 

Keep Communication Lines Open 

The communication program shouldn’t end once an employee starts participating in the plan. After employees enroll in the plan, employers should find ways to encourage them to not only keep deferring into the plan, but to increase their deferrals when possible. For example, when employees receive a raise or a bonus, employers could send a reminder that this may be the perfect time to increase their deferral rate.  

Offering a retirement plan is a good thing—for both employers and their employees. And employers can help ensure the plan’s success by making sure their employees know about the benefits of participating in it.