When the time comes for retirement plan sponsors to develop a new 401(k), it’s all about communication and education.
So says Diversified Retirement Corp. in a new white paper, “Effective Communication Begins With Purposeful Plan Design,” released Monday by the Harrison, N.Y., retirement plan provider.
The paper includes four best practices to help sponsors ensure that their 401(k) or other retirement plans are truly designed to help employees achieve their savings goals.
“Effective participant communication is essential to a successful retirement savings plan, but not even great communication can make up for poor plan design,” said Patricia Advaney, Diversified’s senior vice president of participant solutions, in a statement. “To communicate with purpose and positively impact participant behavior, plan sponsors must review their plans on a regular basis to ensure all features are working in tandem to support key objectives.”
And, according to Diversified, learning to understand and shape participant behavior is essential for plan sponsors who want to help employees save for a well-funded retirement.
Here are four ways to make that happen:
1) Implement automatic enrollment to optimize the benefits of your plan.
More than half of all plans that automatically enroll employees use a default deferral rate of 3% or less.
“Don’t follow the crowd,” says Diversified. “Instead, consider setting a default rate that is at least as high as your current opt-in rate and integrate automatic escalation to improve participants’ retirement readiness over time.”