If you’re not communicating well with employees about your 401(k) plan and providing the advice and guidance they need, they’ll end up seeking advice from other employees — who may not know what they are doing. Each person’s financial situation is different, so what’s right for one employee could be disastrous for another.
A construction company provides a sobering example of what could happen if you don’t make employee communication a key element of your company’s retirement plan.
This construction company had employees working on a variety of different sites every day, and felt that education and communication about the 401(k) plan would be a distraction and a waste of the employees’ time. The employer felt it was best to just let people figure it out on their own. But by failing to provide the necessary information, the company created a situation in which some employees described their 401(k) plan as “a scam.”
Here’s what happened: An employee who was an active investor began approaching other people in the company, offering to make them a lot of money through active trading in their accounts. Eventually, an employee told the HR department about this man who was trying to manage other people’s retirement funds. She was retiring, and claimed she had lost a lot of money working with him and was concerned she did not have enough for her retirement.
Meanwhile, the company’s owner — who was one of the plan’s trustees — had no idea that this active investor was approaching other employees.
That’s just one example of why your company needs to provide employee communication and education, rather than expecting them to figure out the 401(k) plan on their own.
Making Employee Communication Part Of Your 401(k) Plan
If you’re concerned that your company isn’t currently offering enough communication and education around your 401(k) plan, here are six steps to start turning it around:
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Survey your employees to assess their concerns and questions: The HR department and managers, along with the plan’s investment advisor and investment custodian, should lead the employee communication plan in most situations.
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Create an educational curriculum and schedule the roll-out dates: Everyone learns differently, so it’s important to communicate in a variety of media, offering webinars and written materials (electronic and printed), as well as verbal communication, both on an individual basis and in group sessions.
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Communicate the educational plan for the upcoming year to employees: Think of it as handing out a syllabus on the first day of a class. Giving your employees an outline of the educational plan helps them see how different aspects of the retirement plan fit into a bigger picture.
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Inform trustees about your education plans, and ask for their suggestions: While the HR team generally takes the lead, the retirement plan’s trustees should also support these communication efforts.
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Incorporate fun activities into the educational events to make them engaging, instead of a grind: Studies show that financial stress creates problems for both employees and their employers, according to a recent Fortune article, leading many organizations to focus on improving “financial wellness” in the workplace. Avoid adding to employees’ financial stress by keeping educational events fun and light-hearted.
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Debrief after each event and measure the impact of the communication: Remember that the goal with improving employee communication about your retirement plan is to help them become informed financial planners — not become financial advisors themselves.
In the end, each employee needs to make retirement investment decisions based on what’s best for them, rather than blindly following what everyone else is doing. If your company isn’t offering strong employee communication and education on these topics, they tend to fall back on those around them for advice, which may be of questionable value.
Worried about the cost of your current 401(k) plan? Request a free, 30-minute consultation with Richard Brothers and start maximizing your plan’s value.
