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The Importance of 401(k) Plan Communications to Employees

Published by Kim Moore on Apr 16, 2021 6:00:00 AM

Communication is Key

We all know the importance of saving for retirement. However, navigating the information provided to an employee regarding enrolling and then participating in a company sponsored 401(k) plan can be daunting. Benefit plans can be very complex and involve a lot of details. Working through those details and the investment options offered can be stressful without some helpful guidance. Without added support, many employees pass up the opportunity to participate in the company plan.

We encourage all employers to review the following suggestions below to ensure the best communication with plan participants to assist with better participation rates.

      • Define confusing terms. In a 401(k) plan, terms like vesting, forfeitures, eligibility period can be difficult to understand, and different employee situations may require different applications of the terms. Reach out to401k communication is key your service provider for website resources to direct the employee to terms and provisions that are difficult to understand. Have the Summary Plan Description for the plan handy and redistribute it to employees as needed. This is a guide to your specific plan provisions and is written in an easier to understand format.

      • Provide specific resources for employees. Employees may no longer be readily available if they have been laid off, are working from home, or have been terminated. If they still have assets in the plan, ensure you provide a means of communication for these individuals. Direct their questions to a specific e-mail inbox that is monitored by Human Resources or Payroll. Ensure all staff have access to the service provider’s toll-free numbers or websites to ease the burden on your staff to answer questions. Direct participants to make plan changes via the service provider websites versus filling out paper forms.

      • Utilize your Investment Advisor. Most plans have a dedicated Investment Advisor to help the Plan Sponsor review the Investment lineup and monitor fund performance. Discuss with this individual or firm the ability for this group to provide one on one services to your participants. As we have all seen, the financial markets are fluctuating wildly. Having an investment professional that can help provide advice or explanations of market activities can be very comforting to your participants.

      • Communication is the key. You can’t make decisions for your employees, but you can assist them by providing the best information and support that you can to help them work through the information provided about the plan. Providing good information and additional resources to them regarding their retirement savings is a part of your fiduciary duty as the Plan Sponsor and also the right thing to do to help out your employees.

The more information that you can provide, the more you will help your employees better understand their benefit options and ease their concerns regarding the safety and security of their savings.

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At Summit CPA, we specialize in retirement plan audits. If you would like to discuss our audit process in more detail or need an audit, contact our office at (866) 497-9761 to schedule an appointment. We can help you navigate the world of the 401(k) audit as proficiently as possible. We also offer off-site assistance and flat-fee pricing so there are no surprises when the job is complete.

 

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