Encouraging Employee Participation in 401k Plans

How can I get more employees from my company (a print shop with 3 branches) to participate in a 401k Plan? – Tom Miller, Print Shop Company Owner, Philadelphia

Getting employees to make contributions to a 401k plan is a tougher job than it seems. After all, you would think that asking them to save now to secure their future should be real easy. But often, the thought that a part of their paycheck will not be available for immediate expenses puts them off from participating in such plans. Auto enrollment 401k plans are your best bet if you want to set up a retirement plan for your small business that encourages employee participation. Managing the plan itself takes just a few minutes of your time if you choose to go with a customized DIY 401k software like the one offered by http://401k-easy.com/.

Every employee is automatically enrolled in an auto enrollment 401k plan and you simply divert a portion of his/ her salary into the plan from every paycheck. Remember that the employee does have the option to choose a different contribution percentage or to even opt out of the plan. But, you will find that once he starts making an ‘enforced’ contribution, he quickly realizes that saving is not so tough after all and often, voluntarily starts making bigger contributions if possible.

As the 401k provider/ owner of the small business, it is up to you to tell all employees about the plan, how they stand to gain from it and to promote the fact that their savings will be magnified by your matching contributions. Draw up a detailed 401k plan document that is circulated to all new employees telling them all they need to know about the automatic enrollment 401k. Don’t forget to mention the tax benefits they will get from their plan participation.

Remember that not all employees may be able or willing to contribute to the plan. For instance, some may already be contributing to an IRA, in which case, a second deduction from their pay check may not be affordable. Employees who haven’t completed one full year in your organization are not eligible either.

About Elliot Earl, Director, Pension Trade Association
Director, Pension Trade Association Founded in 1982, the Pension Trade Association [California Domestic Nonprofit Corporation #C1629080] is dedicated to helping workers save for their retirement through expanded coverage of 401k -type defined contribution pension plans.

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