Mary Samsa and Judith Wethall Published in Tax Management Compensation Planning Journal

An article entitled “How to Increase §401k Plan Participation – Design and Communication Enhancements” by Mary Samsa and Judith Wethall in the July 7 edition of the Tax Management Compensation Planning Journal provides simple and inexpensive solutions for employers looking to boost participation in their 401k plans. They cite survey findings which reveal that 26% of all eligible workers do not participate in the 401k plans offered by their employers, and that many employers believe 50% or more of their workforce will not have enough savings to retire between the ages of 62 and 65. The authors recommend strategies that focus on changing the 401k plan’s design and/or retooling communication and education materials, and present 10 features that can be added to enhance participation, such as the Safe Harbor plan design, which was created by Congress to avoid nondiscrimination testing.

To increase enrollment through communication and education, emphasis should be placed on building awareness on both the existence and value of employee 401k plans. Samsa and Wethall point out that: “Many companies spend considerable time and expense communicating the introduction of a 401k plan, but fewer regularly follow up after an employee is initially offered 401k plan participation.” Utilizing peer influence and vendor services are also effective means for achieving enhanced plan participation. Ultimately, acknowledge the authors, the most effective design and communications techniques will vary according to the particular employer and its employee base.