Employee Education And Your 401(K): Setting Everyone Up For Success

by Holley Maher

You’ve probably heard the terms “defined contribution” and “defined benefit.” They’ve been popping up more lately because of an emerging trend in which employers are gravitating to a defined-contribution (vs. defined-benefit) approach to their entire benefits package. This transition isn’t a new concept – it happened with retirement plans years ago. Whereas employers used to define the benefit – they promised employees a specific payout at a specific date, as with a pension – today most retirement plans rely on a defined contribution. An employer defines what it is going to give employees today by way of a company match into the 401(k) and puts employees in the driver’s seat for choosing how to allocate and leverage those dollars down the road.  

There are many advantages to defined contribution – the employer can fix or more accurately predict its budget, and the employee has much more choice. The challenge, however, is that once the employee is driving, he needs a lot more education and resourcing to be able to make well-informed decisions with those dollars you gave him.

Do you have an education plan in place? Gone are the days when the annual group meeting sufficed. Are you confident your employees fully understand and know how to maximize your retirement plan? Are you giving them access to tools like one-on-one consulting with the plan’s adviser or lunch-and-learns on financial topics important to them? Talk with your plan adviser about implementing an education plan, and ensure you are setting your employees up for success!

Ryanne Tilley is the manager of retirement and business advisory services at Maher, Rosenheim, Comfort & Tabash LLC, a benefits firm in St. Louis.