5 ways to improve your 401(k)s compliance test results
Published August 14, 2013 1:42 PM
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Updated August 14, 2013 5:22 PM
1 Min Read
1. Use auto-enrollment.
Auto-enrollment ushers both new and existing employees into the company 401(k) plan and promptly boosts participation rates. Of the 44,000 retirement plans serviced by Ascensus, those that implement this opt out structure have participation rates that are almost 10% higher than plans that do not use the function. Research also shows plans that couple auto-enrollment with the automatic deferral increase option see further improvement in helping employees save for retirement.
2. Add a match.
During the financial crisis many companies discontinued their 401(k) match. At this time, companies are considering bringing back their match. The benefits of providing this incentive are two-fold: employees are more likely to participate and save effectively when an employer matches their savings efforts; moreover, employees are more likely to stay enrolled in the plan and at higher deferral rates.
3. Choose a safe harbor 401(k) plan.
Safe harbor plans work particularly well for small-to-mid-sized companies. These plans are not subject to ADP/ACP compliance tests when various conditions are met. Perform a thorough review to see how a safe harbor plan could work for you.
4. Help employees keep retirement top of mind.
Employees should be encouraged to use all the resources made available to them from educational materials to goal-oriented savings tools that help participants regularly monitor and measure retirement readiness.
5. Personalize their experience and outline plan benefits.
Do what you can to individualize the experience for your employees. According to Ascensus, employees who enrolled in their plan after receiving a targeted communication deferred nearly 6% more of their income on average. Documents and other materials that reflect their personal retirement picture and savings efforts go a long way in boosting participation and user outcomes.
