Categories: Technology

When deliberations began regarding the first tax reform legislation in over thirty years, many raised concerns that tax reform measures would adversely affect retirement savings programs such as the 401(k) plan.  Now, as the tax reform proposals have become further vetted, the 401(k) approach to pre-tax retirement savings appears to remain intact and may actually survive “Rothification”.  The IRS also recently increased the 401(k) pre-tax savings contribution limit to $18,500 for 2018.  Despite the confirmed importance of retirement savings vehicles such as the 401(k) Plan, many eligible participants for these employer-sponsored programs do not enroll in the plans, fail to contribute as much as they could, or do not fully understand how to maximize their benefits or select their investment options.  Multigenerational employees also have different financial needs and perceptions, and receive communications differently.   Plan sponsors should take this opportunity, as passage of tax reform legislation appears imminent, to provide eligible employees and participants with an enhanced communications program touting the benefits of 401(k) plan participation.

What Enhancements Can be Made to Existing 401(k) Plan Communications?

As plan sponsors know, certain plan communications are required and are already provided to plan participants through specific channels such as direct mail or e-delivery.   These materials include summary plan descriptions, summary annual reports, and participant fee disclosures.  In addition, there may be safe harbor notices, 404(c) plan disclosures, automatic contribution notices, qualified default investment alternative notices, fund change notices, blackout notices, and perhaps even investment education or advice materials distributed to participants.  A re-occurring debate is that participants do not read, understand, or cannot even locate all of these materials.  Plan sponsors might be well-served by considering the following when enhancing their otherwise required communications:

  • Incorporate tools into a traditional communications program such as mobile applications that can deliver understandable information to those on-the-go, in short snippets, regarding the benefits of plan participation
  • Issue periodic email, text message or other digital/social media reminders regarding increasing savings rates during the year and how a percentage increase can impact retirement savings over time
  • Offer online short videos or podcasts (5 to 15 minutes) that explain 401(k) features and benefits in digestible segments
  • Provide generic plan enrollment assistance either through on-site meetings, video-conference or on-line software
  • Strategically time the issuance of communications well before the due date of a summary of material modification that will allow participants to fully maximize the benefit of a plan design change
  • Connect the messaging with relevant events (such as passage of new legislation; a corporate acquisition)
  • Consider a financial wellness program that can educate employees regarding their whole financial picture, including managing debt and how to allocate available compensation to employer-provided benefit programs

The foregoing suggestions are a starting point and should be tailored to the organization’s needs and employee demographics.  The idea is to develop a strategy that supplements the required communications, and does so in a brief and engaging manner without contradicting plan terms.  The messaging can also refer the employees back to the longer, required communications and documentation which might be located on a company intranet for easy access.  Further, these types of communications do not need to be personalized and should not include personally identifiable information, unless the mechanisms are fully compliant with cybersecurity policies including password protection and encryption.  Also, these particular communications should avoid being fiduciary or advice-oriented in nature.  Instead, the goal is to highlight, and educate employees regarding, the important plan benefits and encourage them to participate in a language they understand.  This approach can also be duplicated for other types of employee benefits (i.e., the ones that survive tax reform).

Back to Workforce Bulletin Blog

Search This Blog

Blog Editors

Related Services

Topics

Archives

Jump to Page

Subscribe

Sign up to receive an email notification when new Workforce Bulletin posts are published:

Privacy Preference Center

When you visit any website, it may store or retrieve information on your browser, mostly in the form of cookies. This information might be about you, your preferences or your device and is mostly used to make the site work as you expect it to. The information does not usually directly identify you, but it can give you a more personalized web experience. Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer.

Strictly Necessary Cookies

These cookies are necessary for the website to function and cannot be switched off in our systems. They are usually only set in response to actions made by you which amount to a request for services, such as setting your privacy preferences, logging in or filling in forms. You can set your browser to block or alert you about these cookies, but some parts of the site will not then work. These cookies do not store any personally identifiable information.

Performance Cookies

These cookies allow us to count visits and traffic sources so we can measure and improve the performance of our site. They help us to know which pages are the most and least popular and see how visitors move around the site. All information these cookies collect is aggregated and therefore anonymous. If you do not allow these cookies we will not know when you have visited our site, and will not be able to monitor its performance.