How to Motivate Employees to Contribute More to Their 401(k) Plan
So you’ve gotten a 401(k) plan set up for your small business. Now what? After taking the time to set up an effective plan for your employees, you need them to start using it! However, many employees aren’t motivated to contribute more (or sometimes at all) to their 401(k)s, which can be detrimental to both you and them.
These strategies will help you – and your employees – make the most of the benefits your small business offers.
Educate Your Employees About the Benefits of 401(k) Plan
First, ensure your employees understand the benefits of contributing to a 401(k) plan. Educating our employees about the benefits of the 401(k) plan, such as tax advantages and any matching contributions, is essential. Be sure to let them know how much they’ll save on taxes by contributing more to their 401(k) plans, and make it clear that their contributions are an investment in their future.
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Offer an Employer Match
Want to benefit your employees (and make your small business stand out)? The easiest way to do that is by offering an employer match as part of your 401(k) plan. What this means is that you’ll make contributions to the employee’s 401(k) plan based on the amount the employee contributes. For example, if an employee contributes 3% of their salary to the 401(k) plan, you could match that contribution.
Not only will this make your employees feel more valued, it’ll also motivate them to contribute more to their 401(k)s.
Make the Enrollment Process Easy
The enrollment process for a 401(k) plan should be simple and straightforward. Make sure your employees understand how to enroll in the plan and how to make contributions. If the process is complicated, your employees may be discouraged from enrolling or contributing.
Offer Automatic Enrollment
Automatic enrollment is a great way to motivate employees to contribute more to their 401(k) plan. With automatic enrollment, you enroll your employees in the plan and set a default contribution amount. The employee can opt out of the plan, but most employees will remain enrolled. This can be a great way to increase participation in the plan.
Offer Financial Education
Offering financial education to your employees can help them understand the benefits of a 401(k) plan and how to manage their finances. Consider offering financial education seminars or one-on-one counseling sessions. The Ubiquity blog is a great online resource for timely, relevant retirement plan information and more.
Communication is key, and this is no exception. Regularly update your employees on the benefits of your small business’s 401(k) plan, its performance, and how to enroll. Keep them informed about any changes to the plan or employer contributions.
When your employees contribute more to their 401(k) plan, celebrate their success (and we don’t just mean with a pizza party). Offering incentives for reaching certain savings milestones can also motivate your employees to continue to contribute more to their 401(k) plan.
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.