How to Make Your 401(k) Plan Employee-Friendly

Author: Siân Killingsworth / 3 Apr 2023 / 401(k) Plan Information, Personal Finance, Small Business 401k

As a small business owner, offering a 401(k) plan to your employees is a great way to attract and retain talent. However, simply having a 401(k) plan isn’t enough to win the loyalty of employees and the attention of prospective new hires.

In order to truly benefit your employees, you need to make sure that the plan is user-friendly. We’re breaking down our top tips for making your small business 401(k) plan easy to understand.

Provide clear and concise information about the plan.

It makes sense that one of the biggest barriers to participation in a 401(k) plan is a lack of understanding. Make sure that your employees have clear and concise information about the plan, including:

• What a 401(k) plan is.
• How your small business 401(k) plan works.
• What the investment options are.
• What the fees and expenses are.
• How to enroll in the plan.
• How to start contributing and make changes to contributions.
• How to access their account.

This information should be provided in a way that is easily accessible. You may want to consider adding resources such as a dedicated 401(k) information section on your company website or intranet.

Offer investment education.

Investing can be overwhelming, especially for those who are new to it. Offer investment education to your employees to help them make informed decisions about their 401(k) contributions. This could include:

• Holding informational sessions or webinars on investing.
• Providing educational materials such as books or online resources. (Hint: the Ubiquity blog is a great resource!)
• Offering consultations with a financial advisor or plan representative.
• Creating a list of recommended investment options based on different risk tolerances and goals.

Remember: Employees who feel confident in their own knowledge about investing are more likely to participate in the plan.

Simplify the investment options.

Help your employees avoid decision paralysis by paring down the investment options your small business 401(k) offers. This will make it easier for your employees to make informed investment decisions, and help them feel more confident doing so.

Consider offering a limited number of investment options, specifically including pre-packaged portfolios that allow your employees to quickly and easily click into saving for retirement.

Automate enrollment and contributions.

You heard it here first: Automatic enrollment is awesome. By automating these employee contributions, you’re making it easier for your employees to participate in your 401(k) plan. Automatic enrollment will be mandatory for most plans in 2025 anyway, so get ahead of the curve now.

You can also offer automatic contribution increases, also known as auto-escalation. This is when the employees’ contribution rate increases annually. This can help employees save more for retirement without having to think about it.

Regularly review and update the plan.

A 401(k) plan is not a set-it-and-forget-it benefit for you or your employees. Regularly review and update the plan to ensure that it remains user-friendly and relevant to your employees’ needs. This could include:

• Reviewing the investment options and updating them as needed.
• Evaluating the fees and expenses (or switching to a provider with low, flat fees – like Ubiquity).
• Gathering feedback from employees and making changes based on their suggestions.
• Keeping up-to-date with regulatory changes and ensuring compliance with all applicable laws and regulations.

By regularly reviewing and updating the plan, you can ensure that it remains a valuable benefit to your employees–and to your small business.

 

Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice.