Practice Strategies

Educating Your Employees about Their 401(k) Plan

A 401(k) plan can offer employees an excellent means to save for retirement. However, workers often pass up the opportunity to participate in their employer-sponsored plans because the information presented may seem confusing or difficult to understand. To engage the interest of your employees and to educate them about the potential benefits of your plan, the information sessions should be carefully crafted. With a little effort, you can increase the effectiveness of these presentations. Here are some tips to help boost participation rates in your practice’s 401(k) plan:

• Prepare employees before the presentation. Assume your employees have little money management experience. When announcing the information session, explain what they will learn and why the information is important to them. Emphasize how they will benefit from attending the session.
• Keep the tone light. A little humor goes a long way in holding an audience’s attention. Encourage presenters to use clear, simple language—avoiding “legalese,” jargon, and complicated charts and graphs. Money management tips and worksheets can be used to engage the audience. Remember to leave plenty of time for questions and answers.
• Sit in on the session. Doing so will allow you to be sure the information presented is fair and accurate. It also demonstrates to your employees the value you attach to the retirement plan.
• Gear the material to the audience. Avoid the “one-size-fits-all” presentation. The material should be geared to the audience’s level of sophistication. Novice 401(k) participants may be over-whelmed with advanced information, while experienced contributors might become bored if too much time is spent covering the basics. If your staff includes both beginning and experienced participants, consider offering two information sessions and letting your employees choose the one that is most appropriate for their needs.
• Demonstrate how a 401(k) plan can make it easy to save for retirement. Many employees who are concerned about stretching their paychecks from week to week may fear they do not have the excess income to contribute to a retirement plan. A skilled presenter can address this concern by emphasizing the potential tax benefits of a 401(k) plan. With a few simple calculations, your employees will see that once tax savings are considered, their contributions may not take as large a chunk out of their paychecks as they might have thought.
• Support your employees in keeping their contributions to a comfortable level. Avoid overemphasizing contributing the maximum amount allowable if that exceeds an employee’s financial ability. Point out that even a small contribution is better than none, especially if the practice is matching all, or a portion, of it. Emphasize that it is far better for employees to start small now and increase their contributions later when they can afford to do so.

A well-crafted 401(k) plan presentation can go a long way toward boosting participation rates. By targeting the information session to your employees’ needs, you can help them make the most of their retirement plan option. And, it’s important to bear in mind that this needn’t be a “one-time-only” event. Get in the habit of scheduling a 401(k) presentation at least once a year. More frequently scheduled information sessions can help make the plan accessible to new employees who join the practice during the year, as well as encourage existing 401(k) participants who may be thinking of increasing their contributions.

For more information about our services to the healthcare industry, contact:
Maxine Lawyer, CPA, Partner - Dallas/Fort Worth at 972.448.6905 or
Philip Fox, CPA, Partner - Houston at 713.297.6914.

The articles in this newsletter are general in nature and are not a substitute for accounting, legal, or other professional services. We assume no liability for the reader's reliance on this information. Before implementing any of the ideas contained in this publication, consult a professional advisor to determine whether they apply to your unique circumstances.
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