3 Ways To Drive 401(k) Participation Rates

How to deal with employees lack of knowledge and interest

401(k) can be a powerful employee retention tool that helps your employees think of their role with your company as a long term play. They look at the total rewards package that you offer factoring in vacation, compensation, insurance benefits and investment opportunities. The challenge is in communicating that message as different benefits are important to different age groups and demographics within your organization. So, where do you begin when it comes specifically to increasing employee participating rates in your company’s 401(k)?

Increasing employee participation not only helps your company’s 401(k)s perform better, but also helps with talent retention as employees see an increased value in your benefits package. It can also lower fees associated with managing the 401(k)s and may allow your executive team (a.k.a. those who are paid the most) to increase their annual contributions. (What’s that saying? Happy CEO, happy life?)

Chances are, you know that increased employee 401(k) participation is a good thing, but you might be stuck on how to actually make it happen. There are so many benefits of participating, but for employees, there are also a lot of reasons not to, like the cable bill, the kids’ shoes and putting gas in their car. This means that the most important piece to winning them over is going to be education, because the truth is, it is a smart investment.

3 Ways to Drive 401k Participation Rates

1. Keep Education Simple. Investments can be complicated. Throw around complicated words and phrases and your meeting will be over before it even starts. Talk about what your employees need to know: how much they should contribute (or can afford to contribute), how that money grows, the tax benefits of having a 401(k) and your company’s contribution.

The best way to show how effective a 401(k) can be is to demonstrate the time value of money. For instance, I recently read about a 401(k) representative that spoke with employees making $13 per hour. Many of them believed they couldn’t afford to contribute, but she asked them to start with one percent of their weekly salary, which was $3.90. Many of them guessed that after 15 years of continued investment of one percent of their income and employer matching contributions, they would end up with $15,000 to $25,000. It came as a total shock to the employees that the number ended up being $81,000.

2. Don’t Assume Your Employees Know…or Care. Even if you offer 401(k) enrollment annually and speak to your new employees about it, they may not remember. Also, they may not care. Your company’s 401(k) plan is a big deal to you, but it likely isn’t to them. The solution? Put on your superstar marketer hat.

Turn your typical two email per year campaign into something that spans multiple platforms, like your company’s newsletter, posters in common areas, advertisements to enroll on your Intranet and maybe even an attention-grabbing extra, like 100 Grand bars with a reminder attached about signing up and a short example about how their investment can pay off.

These are all free or cheap and raise awareness for your company’s 401(k) plan. Get creative and think about what your employees respond best to as well as what’s keeping them from enrolling. For instance, if many of your employees feel that contributing is too much of a financial burden, they are likely struggling and may benefit from money management course offerings.

3. Make it Easy. Many companies automatically enroll employees in their retirement program, offering the chance to opt-out if they don’t want to participate. This simplifies the process and requires an employee to go out of their way not to participate, rather than having to seek it out in order to participate. Immediate eligibility will also increase your participation significantly.

Do your employees and yourself a favor and go the extra mile to rev up your company’s 401(k) participation. Your 401(k) will thank you, and when your employees are ready to retire with their loaded 401(k)s, they will too.


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Jessica Miller-Merrell

Learn more about Jessica Miller-Merrell, SPHR, SHRM-SCP, the founder of Workology, a workplace HR resource, and the host of the Workology Podcast. More of her blogs can be found here.

Reader Interactions


  1. Jason Pinto says

    Jessica, thanks so much for sharing these great tips. I love the point about putting on your “superstar marketer hat”! One additional format that may be effective is via video presentations. People certainly turn to YouTube to gain information on a variety of subjects; thus, online video-based presentations maybe a great way to educate employees on 401(k) plans and other employee benefits.



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