Human Resources: How to Encourage Contributions in Employee Retirement Plans

Nancy Anderson
August 28, 2013 — 2,695 views  
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Employers try to attract the best candidates by offering retirement plans and other benefits, but many employees do not contribute as much as they should to these plans. If you are concerned about low employee contributions to your company's retirement plan, there are a few things you can do to encourage workers to save more money for their retirements. You must comply with the provisions of the Employee Retirement Income Security Act and other relevant laws, but it is possible to increase contributions with a few simple tactics.

Offering to match each employee's plan contribution is one of the easiest ways to encourage people to save for retirement. If your company has a 401(k) plan, you can match a certain percentage of each employee's salary to increase the amount of money employees put away for the future. If your company matches 3 percent of a worker's salary, the match would be $1,500 for an employee earning $50,000 per year.

Employees are more likely to contribute to retirement plans if plan documents are easily understandable, but Andrea Coombes of "The Wall Street Journal" says more than 50 percent of 401(k) participants surveyed said figuring out their 401(k) options is more confusing than trying to understand their health benefits. As a human resources professional, it is up to you to distribute information that clearly explains the plan. You should also be available to answer questions during the open enrollment period.

Many employers let workers decide whether they want to enroll in their retirement plans, but this sometimes leads to low contribution rates. An alternative is setting up automatic enrollment so employees have to elect not to contribute to your plan. If you do this, you must give employees the opportunity to change the amount of money withheld from their wages or decline to contribute to the plan. Attorney Ary Rosenbaum recommends setting the contribution rate to somewhere between 3 and 7 percent so employees are not discouraged when they receive their paychecks and see how much money has been deducted.

The confusion surrounding many retirement plans makes employees hesitate to invest their hard-earned money. One way to overcome this challenge is to arrange for a financial professional to come to your office and provide basic investing advice to employees. This person should talk about your company's retirement plans and explain how each option stacks up against the others. Providing this service to employees could prompt more people to contribute money to your company's plan.

Offering a retirement plan is a great way to attract high-quality employees to your company, but low contribution rates might make administering the plan seem like more trouble than it is worth. Matching employee contributions, implementing automatic enrollment, explaining retirement plans in detail, and giving employees the opportunity to speak with a financial advisor are all good ways to increase encourage employees to save money for their futures.


Nancy Anderson, Inc.

Nancy Anderson is the communities and article Editor for Nancy has 10 years’ experience in the online job search business with Beyond. Nancy's team produces dozens of articles every month for top internet sites. Follow Nancy and the Beyond team on