The Keys to an Effective 401(k) Plan Design, According to Wells Fargo

Other features that are characteristic of what Wells Fargo calls “high-influence plans” include automatic rebalancing, limits on employer stock and 401(k) participant loans and annual re-enrollment, which includes automatic enrollment of all non-participant eligible employees every year and could also include re-enrollment for even participant employees who have never updated their investment options.

A middle-aged participant who started with the plan 15 years ago and remained fully invested in a single stable value fund, for example, could be re-enrolled in a more diversified target date fund, says Hooker.

Targeted communication campaigns, enhanced by emailed messages and including enrollment kits sent by mail is another feature of the best-designed 401(k) plans, according to Wells Fargo.

The retirement plan report found that between 2012 and 2017 employee participation in the 401(k) plans studied rose from 55% to 65%, the percentage of participants contributing 10% of more rose from 35% to 39% and percentage of participants invested in diversified portfolios rose from 71% to 80%.

In terms of generational differences, the report found that boomers are the least likely to take advantage of all-in-one investments like target date funds, although they are more likely than millennials to contribute 10% or more. Millennials tend to be more diversified in their investments, preferring all-in-one investments, compared with older generations: 63% vs. 41% and 46% for Gen Xers and baby boomers, respectively, use this type of investing strategy.