The 401(k) plan has become one of the most popular employee benefits to offer, especially among smaller firms which otherwise wouldn’t be able to offer any sort of retirement package.
But many executives have discovered that the plan can be a tough sell for a variety of reasons. Here are some common presentation mistakes, compiled by the Financial Literacy Center:
Talking over the audience’s head. Even if you understand such concepts as “dollar-cost averaging” and the “power of compounding,” don’t assume your employees do. Surveys show that four out of five American investors are financially illiterate.
Therefore, 401(k) materials that assume familiarity with personal finance are simply not going to connect with most of your audience. Keep it simple.
Failing to explain how to save more. One out of four eligible employees don’t participate in their company’s plan because they think they can’t get by with a smaller paycheck.
By pointing out the tax savings, you can show employees that the 401(k) bite isn’t as big as it appears. If you don’t show how easy it is to start saving, your audience may tune out from the beginning.
Placing too much emphasis on maxing out. If you have a healthy income or you’re already a saver, the prospect of putting 10 percent of your pay into a 401(k) may seem like a snap — but that’s the wrong message to send to most of your employees, who may either be saving very little or not saving at all.
Emphasize that a 1 percent or 2 percent contribution is far better than none at all, particularly if the contribution elicits an employer match.
Failing to monitor the education process. Education should start well before the enrollment period. Keep in mind that your 401(k) administrator’s “educational materials” may directly or indirectly include a push for the company’s other products, such as mutual funds and variable annuities.
Make sure you screen your presenter carefully and consider using independent materials.
Lumping everyone together. Everyone learns at a different pace. You may want to consider giving employees the option of choosing between introductory and more advanced presentations.
Making the presentation too heavy. Too many employers mistakenly believe that a serious presentation must also be boring. A better strategy is to focus on the benefits of the 401(k)plan. Steer clear of jargon, legalese and complicated charts and graphs. Leave time for questions.
Treating the presentation as just another talk. As you notify employees of the presentation, spell out why they should attend, what they’ll learn and how they’ll benefit. Think of your employees as customers, with you trying to sell them the 401(k) plan using an effective presentation.
Forgetting to sell your 401(k) to employees even after they’re enrolled. If you want employees to value your 401(k) plan, take time to sell them on its importance. Show employees that even though financial security is a personal responsibility, you’re willing to help them embrace it with confidence.
Todd Shryock ([email protected]) is SBN’s special reports editor.
