The 401(k): Employer’s Tool in Challenging Times

The Great Resignation and difficulty filling open positions are among the factors that make these bracing times for an employer. The 401(k) is one of the tools by which an employer can meet these challenges, argues a recent blog entry. 

The 401(k) and its features are a key part of a total rewards strategy that an employer can use to its advantage, argues Craig Rosenthal, Head of Strategy and Chief Marketing Officer for Fiduciary Decisions, a firm that works with a wide range of professionals that serve employers and employee plans. In “Recalibrating the 401(k) for Inflation,” Rosenthal even argues that employee benefits—including the 401(k)—are a means by which an employer can address inflation not only for employees, but also for employers. Since inflation affects employees and could spur them to take action to improve their situation, including seeking a new employer that could better help them meet those challenges, an employer may find it wise to find ways to retain employees—and the 401(k) is one of the tools at an employer’s disposal.  

401(k)s Are Potent. Rosenthal suggests that employers can use the 401(k) plan they offer as a way to ease the effect inflation has on employees—and, consequently, on them. And he cites research that suggests that could be potent way to retain them; for instance, he cites an employee benefits survey by Betterment in which: 

• 68% of respondents said that they place a higher priority on building their retirement funds now than they did before the pandemic;
• 65% said they would take a job with another employer if it had a high-quality 401(k) or other retirement plan; and 
• respondents ranked a high-quality 401(k) or other retirement plan as the top financial benefit. 

Employer Match. Furthermore, Rosenthal says, the employer match is an important tool. Respondents to the Betterment survey said it was the second most important financial benefit after a 401(k) or other retirement plan, and 56% said that if a potential employer offered a 401(k) match, that would entice them to leave their current employer. And, Vanguard reports, in 2020, 59% of employers not only offered an employer match, but also made it available immediately. 

Vesting. Rosenthal further suggests that employers consider using vesting to encourage employees to stay. He says that currently, 52% of employers offer some kind of vesting. 

Financial Wellness Programs. Rosenthal adds that financial stress takes its toll on employees. He cites research by John Hancock which found that 58% of workers said that their finances are causing them stress and suggests that employers recognize that offering employees a financial wellness program could be beneficial to employees—and also to them.