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As a plan sponsor, you're in control. The goal of this article is to prompt you to reconsider the role of your 401(k)-to trigger a paradigm shift to reach beyond a simple, myopic focus on retirement preparation. Some of the concepts will sound like benefits heresy, such as removing the word retirement from the plan name and all marketing materials. Other key suggestions are minimizing leakage from preceding and subsequent employer-sponsored plans; "nudging" everyone as a diversity, equity and inclusion (DEI) solution; confirming that the opportunity, value and utility offered by the 401(k) will continue indefinitely, even after employment ends; recognizing the diverse needs of your diverse participant population; and always considering plan participants as customers, whether actively employed or not. These steps will allow you to reach past providing a competitive plan to achieve a competitive advantage for all participants and your organization.
AT A GLANCE
* Plan sponsors should reconsider the role of their 401(k) plans and reposition them as a universal, lifetime financial instrument.
* In order to help participants save more in their 401(k) plans, employers should take steps to minimize leakage from preceding and subsequent employer plans. Steps can include facilitating direct transfers of account balances and accommodating outstanding plan loans.
* Automatic features can help overcome racial and ethnic disparities in retirement savings and accumulated wealth.
* Plan sponsors should consider providing an employee financial wellness program and always treat plan participants as customers, regardless of whether they are actively employed.
Optimizing the Value All Participants Derive From Your 401(k)
got great enjoyment from presenting our 401(k) plan's potential to new hires on their very first day of employment. Many were shocked when I said, "Someday you won't work here" and "Don't miss out." We showed them how contributing to a 401(k) was a simple way to save.
We also presented a 401(k) "magic show," complete with audience participation. We did not saw anyone in half, but we did use a "magic" top hat and a magician's wand to demonstrate plan mechanics. Audience volunteers would be asked to risk 70 cents or $2.00, put it in the hat (as if it were a 401(k) account) and, while others observed, watch it magically multiply because of deferred federal and...