What can be done to change that?

Make 401(k) opt-out instead of opt-in

The majority of 401(k) plans are, by default, opt-in. Some of the enrollment challenges faced by employers to encourage employees to enroll in their retirement programs could be solved by changing the way employees enroll in the plans to begin with.

For some employers who changed to opt-out 401(k) programs instead of letting employees voluntarily enroll in their plans, enrollment rates skyrocketed. Some employers reported that they saw an average enrollment rate of 90% in their retirement programs, with little variation even after months of usage.

This is significant because it means that getting employees to enroll in a 401(k) may be as simple as just doing it for them.

Better education

While it's easy to point fingers as to why employees aren't using their 401(k), the simplest explanation may just be a lack of understanding.

Only a quarter of employees report that they fully understand the benefits offered to them.

While retirement planning may seem obvious to HR professionals and benefits providers, many employees just don't know how to fully engage with the benefits available to them.

Employers should make an effort to not only rethink the way they introduce new benefits and updates to benefits offerings, but also how they continue talking to their employees about what's available to them.

Additionally, well-designed intranets and educational resources for employees can help them feel like they always have a resource they can check.

Easier-to-use documentation

Changing the way you present documentation and tools to employees can make it easier for them to get the information they need when it matters most.

Many of the major investment portals and providers still have cumbersome websites that can make it confusing to find easy-to-use 401(k) information.

If you have a financial wellness benefit for your employees, see if you can use it centralize your 401(k) documentation to make it easier for employees to understand the investment vehicles available to them.

Auto-Escalation

Even if you make it over the hurdle of getting more employees to use their retirement benefits, many Americans still aren't contributing enough.

One way to combat this problem may be with auto-escalation, or automatically increasing contribution amounts every few months or once a year.

Because employees don't regularly engage with their retirement plans, auto-escalation can help ensure that their contributions keep up with inflation rates and raises at work to better prepare them for retirement.

Auto-escalation is designed to be non-intrusive and often goes unnoticed. A few extra dollars taken out every month is negligible today, but with compound interest can make a huge difference later on.

The 401(k) has come a long way in its short life, but there are a few ways that it could change for the better.

As the plan continues to be the most popular retirement benefit offered by American businesses, it may be time to rethink the way it's administered and updated to ensure employees get the most out of the benefit!

Chris Whitlow is the founder and CEO of Edukate, a workplace financial wellness provider with a mission to give every person access to expert financial guidance.