Low 401(k) participation? Be a momma duck!

March 10, 2017—When I visit employers to help them improve their 401(k) and 403(b) retirement plans I often hear them say “We’re just not sure how to get more people to enroll in the plan!” It is a common problem. Pencil and paper at the ready, my trusty binder of go-to resources at my side, I am always ready to help them tackle it.

The logjam in low participation is often simply employee inertia. There are numerous strategies employers can adopt to counter the problem, but they often are at a loss as to which ones to use, and how. Engaging in a bit of Q&A helps me suggest several “gotcha” solutions.

For example, when I ask what they have tried, employers often say, “Well, we’ve always had group meetings with our provider reps, and we’ve encouraged employees to pursue one-on-one talks with them as well. Internally, even though we’re always busy, our HR staff and I make time for any questions.”

That’s great…as in, that’s a great start! But if this is all the encouragement that is in place, many employees will still shy away from participating. Automatic enrollment is often a key solution, but when I recommend it employers are often conflicted. “Isn’t that a bit too…I dunno, ‘big brother-ish’?’” they often ask.

Heavens, no – employers who implement auto-enrollment aren’t dictating what their employees should do! And, when asked in national surveys, employees who are in auto-enrollment plans say they don’t see themselves being forced to take an action with which they disagree. Instead, they express appreciation – as in, “I’m so glad our plan’s auto-enrollment made it easy for me to start saving for retirement!”

The fact is that most employees want to participate in their retirement plan; they are just inert. Many are also discouraged by an investment world they know they don’t entirely understand. Helping them is less big brother-ish, and more like being a momma duck helping her ducklings swim for the first time. And what does a momma duck do? Does she drop off her ducklings into the deep end without support or guidance?


But she does nudge them gently into the shallower pools. The ducklings do not need to learn to “deep dive” on day one; the most important thing is that they start learning how to move their feet.

It’s of paramount importance to reassure employees that they can opt out of enrollment in a 401(k) or 403(b) plan if they wish, and the rules surrounding auto-enrollment require it. Letting employees know they can “hop out of the pool,” so to speak, will help them feel more comfortable putting their toes in the water in the first place! Employees who opt out can always try again, but studies show that most employees who are auto enrolled “stay in the pool” and increase their savings as they “continue to swim.” For these reasons, there’s no shame in being a momma duck by nudging employees into the pool early via auto-enrollment.

When I talk with employers who offer a match, I often hear them say “Won’t auto-enrollment raise our expenses significantly?” I help them here as well by charting out potential solutions. One special advantage offered to employers who auto-enroll is that they can implement a two-year vesting schedule for Safe Harbor contributions. (Safe Harbor contributions – which provide an automatic “pass” on discrimination tests – must automatically vest in plans that do not include auto-enrollment.)

Getting participants “in the pool” of a retirement plan is the first and biggest step to their being retirement-ready. The next step is getting them to swim adeptly and making good use of their time in the pool! This means determining their levels of contribution, and what levels constitute meaningful engagement. If you have doubts concerning any of these issues, let’s chat! Now is the time to email or call me for a consultation.