Managing Missing Plan Participants

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A study by Principal Financial Group found that 59% of nonparticipating employees mistakenly believed they were contributing to their workplace retirement plans.

Causes of Misunderstanding

1. Assumed Enrollment: 49% thought they were automatically enrolled.
2. Self-Sign Up Assumption: 41% believed they had signed up themselves.
3. Eligibility Confusion: 77% assumed they started saving as soon as they were eligible.

Plan Design Issues

According to TJ Arcuri from SageView Advisory Group, plan design or miscommunication often leads to these misconceptions. For instance, plans with a 3% nonelective contribution might make participants think they are contributing when they are not.

Addressing the Digital Divide

Chris Littlefield of Principal notes that direct deposit has created a blind spot for employees who don't regularly check their deductions. Designating specific times, such as during benefits elections or performance reviews, can help clarify enrollment status.

Improving Enrollment Education

1. Onboarding and Annual Webinars: Educate employees on enrollment processes to reduce confusion.
2. Personalized Communication: Use personalized messages to alert employees about their participation status, including details like enrollment dates and deferral percentages.
3. Increased Communication: Utilize various channels and timings to connect with nonparticipants, such as during performance reviews or pay raises.

Automation Benefits

Automated features like auto-enrollment significantly boost participation rates. Littlefield highlights that plans with auto-enrollment achieve around 90% participation, compared to much lower rates without it. The SECURE 2.0 provision mandating automated features for new plans is a step in the right direction, but existing plans also need to adopt these strategies to improve outcomes for employees.

Employers should focus on effective communication and plan design to ensure employees are aware of their retirement plan participation status and take necessary actions to enroll and contribute.

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