23 Ways to Increase Your 401(k) Plan (or 403(b) Plan) Participation Rates

By Ed McClure, CFP®

Plan sponsors are continually seeking ways to increase participation in their defined contribution retirement plans, whether they are businesses with 401(k)s or non-profits offering 403(b) plans. You want to help your employees plan for a stable future; and in the case of 401(k) plans, you don’t want a lack of participation to affect highly compensated employees’ ability to contribute.

When it comes to encouraging employees to participate in retirement plans, it is more effective to focus on human nature and behaviors rather than pure logic and numbers. Most humans are lazy by nature and tend to follow the path of least resistance. Also, though we don’t like to admit it, we are often more moved by emotions than reason. With that in mind, here are 23 ways to increase participation in your retirement plan, whether it’s a 401(k) or 403(b):

  1. Encourage Employees to Accept Automatic Enrollment. If people are apt to do nothing, then starting them out in the plan results in much higher participation rates than if they have to take action to join. Under the SECURE 2.0 Act of 2022, employers are required to automatically enroll eligible employees in the company’s retirement plan, unless that employee opts out. Encourage your employees to participate. 
  2. Utilize Higher Default Contribution Rates. Many employees never change plan defaults, either because they don’t want to go to the trouble or they assume the defaults are what is best. The higher the default contribution rate, the more likely your plan participants will contribute more. Encourage employees to maximize the employer matching contribution.
  3. Offer Automatic Escalation of Savings Rates. Participants are much more likely to increase their saving rates if they can set it once and then forget it. A program that will automatically increase savings by 1% a year until reaching a goal is much easier for plan participants than requiring them to go in and change their contributions each year.
  4. Encourage Employee Pre-Commitments. Have your employees commit ahead of time to using a percentage of their raises to increase retirement contributions. If it’s automated and set ahead of time, they may never even miss the money.
  5. Send Automatic Savings Reminders. Quarterly or annual reminders to increase savings can spur participants into action when they wouldn’t otherwise be thinking of retirement plan contributions.
  6. Offer Gift Incentives for Participation. Under SECURE 2.0, employers are allowed to offer small incentives for retirement plan participation, such as low-dollar gift cards.
  7. Furnish Online 24/7 Account Access. Employees will likely feel much more comfortable putting their money into your plan if they can monitor their investments any time of the day or night. 
  8. Provide Mobile-Friendly Account Access. People spend so much time on their phones today that they have come to expect mobile-friendly access. Without it, your employees may be turned off from your retirement plan—and less likely to participate.
  9. Take Plan Design Seriously. There is no one-size-fits-all retirement plan. When designing your plan, keep your unique company in mind. A sophisticated plan is useless if it doesn’t meet employee needs and make them want to participate.
  10. Eliminate a Waiting or Vesting Period. During the hiring process, new employees expect to fill out a lot of forms and sign up for things. If you make them wait, they’re less likely to go back and enroll once they have moved beyond their initial onboarding with your company.
  11. Offer a Match. A company matching contribution is an automatic 50% or 100% return on investment for your employees. That kind of free money is hard to leave on the table. Many plan participants invest just enough to get the company match, so the more investing a full match requires, the more participants will invest.
  12. Allow Loans and Remind Employees About Hardship Withdrawals. It can be scary for some people to put their money into a plan knowing they can’t touch it for years, no matter what trials life sends their way. Knowing they can tap their accounts if they really need to can increase participants’ comfort with investing in your plan. Under SECURE 2.0, the retirement plan must allow for hardship withdrawals up to $1,000 per year for “emergency financial needs” without the early-withdrawal penalty.
  13. Offer a Roth Option. Younger employees are drawn to Roth accounts because they offer free compounding interest. If you don’t offer a Roth account, your employees may opt to invest in a Roth IRA over your 401(k) plan. Under SECURE 2.0, for some older workers, so-called “catch-up contributions” are required to be in a Roth account within the plan, beginning in 2026.
  14. Furnish Investment Advice. Investments can be confusing and intimidating. For many employees, having to choose their own investments is enough of a roadblock to keep them from investing at all. Providing professional help removes that roadblock to participation. Schedule regular presentations and employee meetings with the investment advisor to the plan.
  15. Teach Financial Wellness. If you can help your employees pay down their debt and get a handle on their spending, they are much more likely to be able to contribute toward a 401(k) plan. Through financial wellness education, they also gain a better understanding of the importance of saving for retirement. 
  16. Explain the Tax Advantages. A lot of people don’t fully grasp the benefits provided by a tax-deferred retirement saving plan. You need to educate your employees in a way they’ll actually understand to motivate them to take advantage of what you are offering. For certain low-income employees, beginning in 2027 under SECURE 2.0, a Federal “Saver’s Credit” will allow an extra tax benefit to those who participate in their employer’s retirement plan.
  17. Make it Personal. Numbers put people to sleep, but stories of real people and how their lives were affected by their savings habits strike an emotional chord with your employees. You could even have company retirees come back to talk to employees about their experiences in retirement and how your retirement plan has impacted them.
  18. Include Student Loan Matching Contributions. Under SECURE 2.0, an employer can make a matching contribution based upon the employee’s student loan payment. This provision addresses the fact that employees may be reluctant to save for retirement because of hefty student loan payments.
  19. Inform New Participants About the 401(k) Database. Another feature of SECURE 2.0 is the creation of the federal 401(k) database that will allow participants to find an employer’s 401(k) plan if the now former employee loses track of it later on. Studies show that millions of 401(k) accounts are “lost” and go unclaimed by former employees because they lose track of the plan account.
  20. Involve Spouses. Your employee may not be the financially savvy half of their marriage. Involving spouses in communications and education can increase participation rates because you are reaching a broader and possibly more highly motivated audience.
  21. Personalize Communications. Instead of generic, templated communications that only apply to a percentage of the recipients, make it more personal. Send congratulations to employees who join the plan or increase their contributions. Send communications to those who are barely participating showing them the difference that even a 1% contribution increase can make. Handwritten letters go even further.
  22. Reward Loyalty. Steal a page from most retailers’ playbooks and create a loyalty program. Offer prizes or rewards for years of participation or achieving certain saving rates. Publicize and celebrate your employees’ retirement saving accomplishments.
  23. Involve Your Marketing Department. Your HR department is really good at what they do, which includes completing forms, detailed documentation, and regulatory compliance. Those who are good at inspiring action get moved to the marketing department. If you want to inspire people to participate in your retirement plan, consider getting the creative people from your marketing department involved in communications.

Increasing employee participation rates can be vital to the success of your 401(k) or 403(b) plan. Contribute to your plan’s success by including as many of the above strategies as possible. If you would like to learn more about how McClure Wealth Management can help, give me a call at (760) 607-0611 or email [email protected] to set up a consultation.

About Ed

Ed McClure is a CERTIFIED FINANCIAL PLANNER™ practitioner and founder of McClure Wealth Management. With over 25 years of experience, Ed works with business owners who want to maximize their retirement plan benefits, businesses that need help setting up and managing a 401(k) for their employees, and families who want guidance while planning their futures. He is known for simplifying complicated and intimidating topics and making wealth management concepts easy for others to remember and understand.  

Ed has established himself as a trusted resource for business owners and individuals, and his mission is to help his clients achieve the financial independence and well-being they deserve so they can give their time and energy to the people and things they love. He has a bachelor’s degree in finance from the University of Illinois. In his spare time, Ed conducts financial workshops for the Just In Time for Foster Youth organization, which helps equip young men and women as they come out of the foster care system. He also loves to travel and spend time with his favorite people. To learn more about Ed, connect with him on LinkedIn.