If you want to keep your small business employees happy and productive, a 401(k) retirement plan is one of the best things you can offer. An effective enrollment process that makes saving for retirement easy and affordable is the key to getting employees excited about participating in your company’s 401(k) plan.
Make your 401(k) plan simple to understand (and easy to access).
Make sure employees know how to enroll in the plan and make changes to their accounts. Employees should be able to access their information online, including:
- How much money is in their account
- How much they’ve contributed over time
- What investments are available for them to choose from (and how those investments have performed)
Offer automatic enrollment.
The best way to get employees to participate in a 401(k) plan? Make it easy.
Automatic enrollment is exactly what it sounds like: After meeting certain requirements, you can automatically set up small business 401(k)s for your employees.
This can be done by age or tenure, but it’s most effective if you use both (for example, you can automatically enroll employees who are 21 years old or older and have more than six months of service at your company).
You can also set up automatic escalation in which the amount of savings automatically increases after a set amount of time – such as annually.
Foster a culture of retirement savings.
Finally, to truly get your employees excited about participating in your 401(k) plan, you need to foster a culture of retirement savings. This means emphasizing the importance of retirement savings and encouraging employees to save for the future. This could look like financial wellness programs or access to retirement resources.
Encourage education.
One way to help employees understand how their contributions will help them reach their savings goals is by showing them how much they’ve put away over time. Ask these questions:
- How much have you saved?
- How much can you afford to contribute out of each paycheck?
- How much do you need to save each month in order for your money to grow into a comfortable nest egg by the time retirement rolls around? Use our 401(k) Calculator to help determine the amount you’ll need.
- What will be the total amount in your 401(k) account when it’s full, and how long do you need to contribute more funds to achieve that goal?
Offer a matching contribution.
If you can, a matching contribution is one of the best ways to increase employee participation rates and encourage workers to save money.
A matching contribution is your promise to match the amount that an employee contributes to their 401(k) plan. For example, offer a dollar-for-dollar match on up to 3% of eligible compensation plus an additional 50 cents per dollar for any amount over 3%. Employees will have an incentive to save up to 6% or 7% of their income through your plan.
