Achieving Better Participation in Company 401k Programs

Many companies struggle to get employees to participate and to participate at adequate levels in their own 401k retirement savings. A recent article by Lou Carlozo in the CPA Insider quoted Keith Baker of North Lake College in Dallas, “Here’s a scary fact: The average person at age 65 and up has only $41,800 on average in a 401k or Thrift Savings Plan.”  The article also referred to the Bureau of Labor Statistics which indicated that in the private industry subset, the participation number in retirement plans was 49%. Among the two major categories in the civilian workforce surveyed by the BLS, only one—state and local government workers, at 81%—showed a healthy participation rate.[1]

There are a number of solutions to this dilemma. Mr. Carlozo noted, auto-enrollment, communication, education on the tax advantages, focusing on overall financial wellness, the benefits of an employer match, and thresholds that reward initial investments through a higher match.

My personal experience is consistent with the problem in private industry. I am a firm believer that companies, even small companies that offer a 401k retirement plan, must provide continuous employee education.

One firm I am familiar with employs a wealth manager who provides personal financial planning to all employees with no fee to the employee. The wealth manager also advises the employee-run investment advisory committee.  Financial planning has educated older workers on their ability to retire while proving guidance to younger staff on retirement, college planning, and wealth building.

Employee education includes multiple mediums of communication. The use of online materials may be filled by plan administrator website resources.  Lunch and learns covering relevant topics is another way to engage employees on the benefits of savings.  These can cover a wide-range of topics including saving for college, how social security works, the benefits of a Roth vs. traditional retirement savings, and more.  But personal contact with a trusted advisor allows the employee to discreetly ask questions about their situation without airing their financial situation in front of co-workers.

Finally, a hot topic these days is retirement readiness, meaning – is the employee in a good position financially and emotionally to move into retirement. Employing older workers has many benefits but they often come with some higher costs.  Positioning your firm’s employees so that they are financially able to retire may allow them to step into the next phase of their lives and create new opportunities for younger workers.


[1] AICPA Journal of Accountancy, The CPA Advisor, dated December 12. 2016 by Lou Carlozo.  Accessed December 12. 2016 via AICPA website,

photo credit: Got Credit 401k via photopin (license)

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