IMHO: Why Bother?

Here’s a question to ask your plan sponsor clients: “Why do you offer a 401(k) plan?”

I’m guessing that many, perhaps most, would say simply, perhaps without giving it much thought, “to attract and retain good employees.” That’s what more than half of the plan sponsors canvassed in a recent Wells Fargo survey said (see “Survey Suggests Gaps in Plan Sponsor Goals, Roles”), and it’s one of the top reasons cited by none other than the Department of Labor . I’m guessing a similarly high number would say that they “have” to offer the plan as part of their benefit offerings to be competitive.

In fact, I was surprised that 45% of the respondents to the Wells Fargo survey indicated that a primary goal of the program was to provider workers with the means to arrange for a financially sound retirement. Not that that isn’t in the back of plan sponsor minds; I just don’t think it looms large as a rationale for the time, energy, and expense of establishing and keeping these programs in place.

Still, I think for most employers, these programs remain a “take-it-or-leave-it” proposition. Oh, they want employees to take advantage of them—and participation rate remains a key metric for many programs. But I suspect that most employers think that, if they offer a program that allows workers to save efficiently and effectively (and at a reasonable price), well, I suspect they feel that they have lived up to their end of the bargain.

Of course, we all know that the employer plays a key role in the true success of these programs, and that an active and engaged plan sponsor is worth their weight in gold (literally) in terms of getting workers to participate, and to participate at levels that eventually can help ensure their financial independence.

We all know who they are. Generally speaking, they are the ones who go above and beyond the mere requirements of the law regarding plan information and communication. They are the ones who not only inspire confidence in their plan, but in the ability of their co-workers to take an active role in helping ensure their own financial well-being. They are the ones who adopted automatic enrollment before it was “cool” (or sanctioned via the Pension Protection Act); who probably know exactly how much their plan costs; and, yes, who probably, early on, saw the advantages in bringing the help of a financial adviser to their program. And, yes, odds are they are also the ones who have plans with higher participation and deferral rates, and a more motivated group of participant savers, to boot.

I’m sure many who don’t take those steps are nonetheless attentive to the requirements and obligations of their duty as a plan fiduciary—they simply lack the time, energy, or volition to make that kind of commitment. Some, I’m sure, worry that going beyond the law’s requirements places their firm—and them personally—at risk.

But, in my experience, employers who adopt a “take-it-or-leave-it” approach often find that that is exactly how their workers feel about their retirement plan.

—Nevin E. Adams, JD