Falling 401k Participation Rates - Reversing a Negative Trend
By John Blossom, President, Alliance Benefit Group. You may discuss this issue with John by contacting him at 800.224.4015.
Despite a recovering economy, participation rates in 401k plans continue to drop. According to the Profit Sharing/401k Council of America (PSCA), participation rates in the retirement plans have dropped from 80% in 1999 to 70% in 2003. But what does this mean for the plan sponsors and for the participants?
The media has been reporting for some time that the plans themselves are scrutinized for what they do not offer participants and the latest study indicates that participation may still be down due to the uneasy feeling by some investors in the state of the marketplace. So what can companies do to rekindle the desire of employees to participate in 401k plans? Alliance Benefit Group, a leading provider of retirement plan administration and services recommends the following:
Revisit plan options. Not every employee is the same. Employees of your company vary in age, needs, short-term and long-term goals, etc. Be sure the right mix of investment options are available so every employee can best maximize their savings potential in your plan.
Provide investment advice to participants. The average 401k participant is not a savvy investor. Most view their plan as the cornerstone of their retirement and do not want to take a chance by making imprudent decisions with such a large portion of their retirement. Provide them with an opportunity to talk with an independent, third-party professional who can guide them in the right direction regarding their retirement plan.
Ensure educational programs are available for employees. There are employees who may not have the need to take direction from a financial professional. They may only have the need for a seminar or workshop, which will provide them with thorough details of the plan so they can best understand what is available to them.
Open communication with employees. Be sure you are communicating with your employees on a regular basis regarding the plan. Those who watch the news or read the newspaper are naturally concerned over the strength of the economy and our national recovery. Because everyone was stung by the events of the past three years, they need the affirmation that their employer is doing everything possible to provide the best plan available.
401khelpcenter.com is not affiliated with the author of this article nor responsible for its content. The opinions expressed here are those of the author and do not necessarily reflect the positions of 401khelpcenter.com. This article is for informational and educational purposes only and doesn't constitute legal, tax or investment advise.
