Help Your Employees Become “Retirement Ready”

National 401(k) Day began in 1996 by the Profit Sharing/401(k) Council of America (PSCA), known today as the Plan Sponsor Council of America. The Friday following Labor Day (Monday) was chosen so employees can “start the week with Labor Day and end the week with Retirement.”

This holiday promotes retirement savings education and PSCA encourages companies to give their employees the information about their 401(K) in fun, easy-to-understand ways. Retirement planning is a complex topic – rules change as quickly as the market changes. Less than 40% of Americans can answer basic questions about their 401(K) so it’s a good thing we have a holiday dedicated to learning about them.

Increasing longevity, overwhelming debt, and rising health care costs can challenge the ability of the American worker to prepare for retirement. Further, plan sponsors that offer 401(k) plans have an obligation to provide employees with education and the tools to help them prepare for retirement.

Employees need help developing the skills necessary to make informed decisions and to take action to improve their overall financial well-being. “Retirement planning now and into the future requires people to effectively manage and reduce their personal debt and provide for family needs like insurance, education funding, and health care planning.

To help employees become “retirement ready,” plan sponsors should consider the following initiatives:

• Educating employees about the value of 401(k) participation and more contributions;
• Offering impartial advice to 401(k) participants to assist them with making informed investment decisions;
• Providing a bigger financial picture to put all their decisions in perspective and understand how each decision today will affect their retirement tomorrow;
• Consider implementing the following plan design changes:
  1. Automatic enrollment (with opt-out provision).
  2. Initial minimum contribution of 5% coupled with an automatic contribution increase of 1% per year until 10% is reached (with employee able to change or reduce at normal intervals).
  3. Default option is an actively managed, lifestyle fund, or target fund (no more stable asset or money market funds as the default).
• Furnish lots of good plan information. Regularly tell your employees about the plan and it’s benefits to them. Do this through more than just one medium. Use emails, newsletters, internet, intranet, statements, etc.

All materials are available on PSCA’s website and can be downloaded free of charge to use—for 401(k) day or for use later in the year. These resources can be customized with a company logo, plan name and the plan’s contact information. Past campaigns are also available to PSCA members at www.psca.org/401kday

The Retirement Advantage, Inc. (TRA) is a premier third-party administrator (TPA) that specializes in administration, consultation and compliance of retirement plans for businesses nationwide. When you partner with TRA, you gain a trusted retirement plan expert.

For over two decades, TRA has been committed to delivering results for our business partners, plan sponsors, and participants so that they can achieve their financial goals. TRA is one of the largest independently owned, privately held third-party administrators in the nation because we focus on your clients’ success. Discover what makes us a successful TPA firm.