Beyond 401(k) Day: How advisors can encourage plan sponsors, participants to take action

To celebrate National 401(k) Day today, Chuck Smith, Nebraska practice leader, and his team at Prime Capital Retirement are reconvening for the 2nd annual 401(k) Day event. This year’s event focuses on the “1% Challenge,” an innovative event designed to boost retirement savings and encourage healthy habits.

The challenge encourages participants to take two impactful actions:

• Increase their retirement plan contribution by 1% of their compensation. For example, a 55-year-old earning $70,000 annually could increase their retirement savings by $16,779 with just an extra $16 per week.
• Run or walk 1% of 401 kilometers (4.01k), or about 2.5 miles.
• To incentivize participation, everyone who completes the 1% Challenge on September 6 and logs their activity will be entered into an hourly raffle for a $100 gift card, with winners announced every hour from 1:00 am to midnight.

Last year, Smith, along with his team, set a goal of running 401 kilometers – or 250 miles – throughout the week leading up to National 401(k) Day. We talked to Smith about 401(k) Day – and some of this thoughts about the importance of financial literacy and how employers can help their employees build retirement security.

Q: Was last year’s 401(k) Day event successful with employees?

A: Last year’s 401(k) Day was definitely a success. Our office combined to run 401 kilometers over the course of the week which, besides being a great team-building event, brought a ton of awareness about National 401(k) Day to our clients, we provided a wide array 401(k) Day content for clients to distribute to employees, and we received great feedback from clients and participants. As part of that 401(k) Day outreach, we introduced clients and their employees to the concept of the 1% Challenge; encouraging employees to increase their deferral percentage by 1% by showing how little impact that contribution has on their current income, but what a huge difference it makes on the amount they could eventually have for retirement.

Q: What changed in 401(k) plan participation since last year’s 401(k) Day?

A: If there was a missing element from last year’s event, it is that we didn’t have a way to measure the impact, besides anecdotal feedback from our clients. It was our first year and we knew going in it would be something to address later, but we didn’t want that to stop us from getting the ball rolling on the event. What the first year proved though was that employers were willing to get behind the event.

Q: What is the focus of 2024′s 401(k) “1% Challenge”?

A: We’re super excited about the focus of this year’s 1% Challenge. We knew we wanted to include our plan sponsor clients in the running aspect of 401(k) Day, but incorporating the 401 kilometer run that we did last year was proving to be difficult based on the different size and demographics of our clients. For example, having a client’s employees run a combined 401 kilometers may be too easy for a large employer with thousands of employees, but too difficult for a smaller employer with only 15 or 20 employees. Instead, we incorporated the running element from last year’s 401(k) Day directly into the 1% Challenge.

To complete the challenge, employees must run or walk 1% of 401 kilometers, which equates to 2.5 miles, and increase their deferral rate by 1%. To both encourage participation and create a way to track participation, we created a website in which participants will log their run or walk and commit to increasing their 401(k) or other retirement plan contribution. Every hour, from 1:00 a.m until midnight, we will be giving away a gift card to somebody who completes the challenge. And since we will be able to report that information directly back to plan sponsors, they can both measure the impact of the challenge and incorporate this event into their own larger wellness program.

Personally, I will be running 4.01 kilometers every hour starting at midnight on Friday through 11:59 p.m. on Friday night.

Q: What steps can other employers take to increase 401(k) plan participation? This week? Throughout the year?

A: While we think the 1% Challenge is a fun new way to encourage 401(k) participation, there are myriad other ways plan sponsors can increase awareness of their company retirement plan. In conjunction with 401(k) Day, employers can send out educational emails, newsletters or videos, host a 401(k) Enrollment Day or offer one-on-one sessions with HR or their financial advisor. At a minimum, employers could take the day to remind employees about any matching contributions, emphasizing the “free money” aspect.

Beyond just 401(k) Day, the best way to increase 401(k) participation is by offering regular financial wellness seminars; educating employees on financial literacy, emphasizing retirement planning and the long-term benefits of consistent 401(k) contributions. Administratively, simplifying enrollment to ensure the on-boarding process is straightforward and accessible is key. Of course, plan design options like automatic enrollment and auto-escalation should always be considered as well.

Related: Tomorrow is 401(k) Day! PSCA releases ready-to-go campaign for employers, plan sponsors

Q: How can employers/plan sponsors stress the importance of 401k plans for those not participating?

A: Unfortunately, no matter how much financial and retirement plan education is provided, there will be employees who choose not to participate. For some, this may indeed be the appropriate financial decision. But if the number is significant, employers should target non-participants directly by creating specific content for them, and discuss with their advisor whether it makes sense to reach out individually to employees who aren’t enrolled and highlight the advantages tailored to their specific needs. New laws also permit employers to provide small incentives (gift cards, etc) for enrolling in the 401(k) plan. None of these should be overlooked.