By Mark Olsen, Managing Director at PlanPILOT
As a plan sponsor for your company’s retirement plan, your role in helping your employees achieve their retirement goals may be more involved than you may think. Even though you’re likely acting responsibly, managing the mechanics of the plan and meeting fiduciary obligations, you have the opportunity to help your participants meet lifelong objectives that could significantly impact their retirement futures. One of the most valuable gifts you can offer is the ability for participants to retire on time, with financial stability and dignity.
At PlanPILOT, we believe that providing more than just the basics in a company retirement plan not only helps with employee retention and job satisfaction, but also provides an opportunity to make an impact on the lives of employees and their families.
To help employees close their retirement savings gap, plan sponsors can adopt several actionable strategies, including optimizing plan design, improving financial wellness offerings, and simplifying the retirement planning experience. Leveraging behavioral science can significantly boost participation and contribution rates. Let’s see how these could be implemented.
Optimize Plan Design Using Automation
- Implement automatic enrollment and escalation: Automatically enroll new employees in the retirement plan at a default contribution rate and gradually increase their contributions over time. If desired, employees may opt-out or adjust their contributions, but this ‘gentle introduction’ may help get them started.
- This counters employee inertia, dramatically boosting participation and savings rates. Under the SECURE 2.0 Act, many new 401(k) and 403(b) plans are required to use automatic enrollment and escalation.
- Improve investment defaults: Default employees into well-designed, diversified investments like low-cost target-date funds (TDFs). These automatically adjust asset allocation as a participant ages, making investing simple.
- Offer both Roth and traditional 401(k) options: Give employees the flexibility to choose their tax advantage. Roth contributions are made with after-tax dollars, and qualified withdrawals in retirement are tax-free, while traditional defined contribution plans offer a tax break today. Today’s younger participants are more inclined to save in after-tax Roth accounts than traditional tax-deductible ones.
- Facilitate higher catch-up contributions: Inform and educate older employees about the SECURE 2.0 rules, which provide higher catch-up contribution limits for those ages 50 and over. (Note that “catch-up” contributions must be made into after-tax Roth 401(k) or 403(b) accounts starting in 2026 for higher-paid older employees. Be sure to add this aspect to your plan to help your older participants save more).
Enhance Financial Wellness and Education
- Provide financial coaching: Offer employees one-on-one sessions with financial advisors or coaches to discuss personal finances, including budgeting, debt management, and retirement goals. Personalized advice addresses individual needs and can result in tangible actions.
- Promote emergency savings options: Employees with high-interest debt or low emergency savings often feel they cannot afford to save for retirement. Offering a workplace emergency savings account (ESA) can help reduce financial stress and improve long-term retirement savings.
- Since 2024, the SECURE 2.0 Act has allowed for pension-linked emergency savings accounts (PLESAs), which are part of a defined contribution plan. Separate, “out of plan” ESAs can also be offered, with more flexibility for employees.
- Implement student loan matching: Under SECURE 2.0, employers can “match” an employee’s student loan payments with contributions to their retirement plan. This can help alleviate high debt loads, especially for younger employees, without sacrificing retirement savings. Student loan debt remains an issue for many younger workers.
- Use visual and interactive tools: Provide online calculators and tools that allow employees to model various savings scenarios. Seeing the potential impact of small contribution increases can motivate them to save more.
Improve Communication and Engagement
- Provide personalized statements and reports: Instead of generic mailers, provide personalized reports to employees showing their estimated monthly retirement income and how they compare to peers.
- Simplify plan communication: Use clear, simple language to communicate plan benefits. Overly complex or jargon-filled information can overwhelm employees and discourage participation.
- Leverage social proof: Use peer comparisons to motivate employees. For example, a statement can show how an employee’s savings rate compares to the average for their team or age group.
- Promote a culture of financial wellness: Position retirement benefits as a vital part of overall financial wellness. Emphasize that the company is invested in its employees’ long-term financial stability to increase loyalty and engagement.
Enhance Retirement Income Solutions
- Offer in-plan income solutions: Provide options within the retirement plan for converting savings into a reliable income stream during retirement. This can include annuities, managed payout funds, or customized managed accounts that offer both growth potential and stability.
- Consolidate accounts with auto-portability: This is especially helpful for younger employees who change jobs frequently. Auto-portability can automatically transfer an employee’s small-balance retirement account to a new employer’s plan, preventing lost or forgotten savings.
In summary, implementing even a few of these strategies can inspire and motivate employees to have confidence in saving for their future. Inspired employees who also have confidence their employer is doing its best to help can improve employee morale, productivity, and deliver ancillary benefits to everyone.
Are Your Participants Behind Saving for Retirement?
Are you ready to upgrade to a new standard for your benefit planning and company retirement plan to help your employees meet their retirement goals?
At PlanPILOT, we’re creating the standard for client experience. Independent and impartial by design, we apply our skill to every facet of plan development and implementation to help you enjoy meaningful results. Our client partnerships are built on trust, communication, and responsibility—cornerstones of a healthy, prosperous relationship. We’re committed to providing unbiased guidance, informed innovation, and an integrated approach tailored to your unique objectives.
Our team of seasoned professionals upholds the highest professional standards, so every strategy we recommend supports both your organization and the participants who depend on it.
Reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.
About Mark
Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.