KnowHow Archive

Plan Sponsor Guide Participant Guide

Easy Rider

Odds are, your retirement plan is more complicated than it was 20 years ago.

Even if you haven't yet added a Roth 401(k) or a participant loan feature, most plans offer more fund choices than ever before—and with more choice, typically, comes more information to read and more fund prospectuses to digest.
None of this has been done deliberately to confuse or intimidate participants; yet, in many cases, that has been the result. In fact, studies have suggested that too much choice can actually dampen participation rates.
There have been a number of potential solutions to help participants make sense of this complexity (see Survey Says), and plan design features like automatic enrollment and target-date funds have been enormously successful at bridging these gaps.
Still, for plan sponsors still hesitant to adopt automatic enrollment, but interested in helping participants get started on the right path to saving for retirement, there is an alternative—a way to make enrollment easier for participants.
A number of providers already have introduced a simplified enrollment form, and several have reduced it to the size of a post card.
This month's Know How can serve as an "easy enrollment" form for your plan. All a participant has to do is designate a beneficiary, choose a savings rate, and select a target-date solution. Your plan may not have a target-date solution on the menu yet, but more than three-quarters of the respondents to PLANSPONSOR's 2006 Defined Contribution Survey did.
I hope you find it useful, and look forward to your feedback.