According to the National Bureau of Economic Research, the overall 401(k) participation rate among American employees is pretty dismal. Given the significant advantages of the 401(k), such as employer match, favorable tax treatment, and the prospect of having more to live on in retirement, it seems like a no-brainer. Yet, getting everyone on board is not always easy—especially when employees are focused on meeting the demands of daily living.
As our case study shows, automatic enrollment is one remedy that can be particularly effective in increasing participation rates.
A client approached us with a particular 401(k) challenge. With a workforce of primarily male, Spanish speaking employees earning $14-$18 per hour, the company was struggling with below industry participation in their 401(k) plan. How could we convince employees to start enrolling?