Grand Rapids Business Daily

How do you explain 401K benefits to employees so that it increases participation?

Explain 401K benefits in a way that reached the audience, is easy tof them to understand and emphasize the advantages of a 401K. How can you explain this benefit during employee orientation so that it results in high participation, less confusion and fewer phone calls for clarification.

Public Comments

1. If your company has a match program, thell them that they get "free" money. 401(k) are difficult to explain to people who don't know what they are. The idea of putting a percentage of their paycheck away so that it is untouchable for decades, does not come across very well. I started investing in mine when I got my first real job out of college. My Dad, who is my financial advisor, told me to put the maximum in. I didn't see the point, but luckily I was at the age when I knew that Mom and Dad knew best.
2. Use analogies to explain the concept of receiving contributions from employers based on individuals; commitments; explain the benefits of deferred gratifications; take simple examples of two different pople, one availing 401k and another that doesnt. Keep the potential benefits and variations in options as separaret explantion, well after you have buy-in for involvement. it will make it easier to keep people of different risk profiles together for the 'concept selling' and later you can address them differently when you discuss different options of choosing diff. investments. good luck!
3. At any company I have worked for this is provided by the 401k administrator. They usually have meetings each year with any interested employee. (this may be law) You are legally bound NOT to influence employee's decisions. Yes, 401k's are great asset, but your not the one to tell your employee's. The only thing an employer can do is offer better "matching funds", but again.....NO persuasion. You should check the IRS rules for employers regarding 401K. 401K is named for the IRS code that regulates them.