The Modern 401(k): Meeting the Evolving Needs of Today’s Workforce

As an employer, you understand the importance of staying connected to the needs of your ever-evolving workforce.

Employees today value a strong benefits package more than ever—compensation alone is no longer the deciding factor. In fact, 92% of employers state that their employees today expect a modern benefits package.[1] Employees value many other factors, including their health and retirement benefits.

93% of employees state that a company's retirement benefits influence whether or not they take a job.[2] Retirement benefits can clearly make a difference and create a competitive edge. Many of the major concerns of employees are centered around having a happy retirement.

• 54% of employees say retirement planning assistance is a high priority.[3]
• Income in retirement is dramatically uncertain. Only half of the OneDigital Employee Value Perception Study respondents stated they know where their paycheck will come from when they retire.[4]

Now more than ever, it helps to be the employer with a standout retirement program that demonstrates a commitment to employee financial wellbeing.

Understanding Your Top Talent

As employers, we are all competing for top talent, and having highly functioning employees is the key to the success of a successful organization. When recruiting, it’s important to know who you are competing against. What type of employee would you like to recruit? What factors make someone valuable to your organization? Then, when you’ve identified the ideal employee for your organization, you must understand what benefits or features will make the most significant impact on their lives.

There is a wide variety of publicly available information on organizations' retirement plans that can help you measure your plan against your competitors. Resources such as publicly available Form 5500 filings, auditors’ reports published on efast.dol.gov, and surveys such as the PLANSPONSOR Defined Contribution Plan Industry Report can be valuable in understanding the retirement plan space.

When doing your research, pay attention to:

• Eligibility requirements
• Employee contribution types: pre-tax, Roth, after-tax
• Employer contribution types, matching formulas, and funding frequency
• Vesting schedules

How do your plan’s features compare to your competitors and industry standards? Are your offerings aligned with the talent you want to attract? For example, suppose you have a strong match formula and a competitive vesting schedule. In that case, you can leverage this knowledge in interviews with potential employees to showcase your commitment to their long-term financial wellbeing.

A Measure of Commitment

The majority of workers claim they will be more attracted to an employer committed to their financial wellbeing.[5] Therefore, you must ensure your 401(k) plan reflects that commitment. Be sure to meet with your plan advisor and service provider to review your plan design and service offerings and get their input on what can be added or changed to enhance your employees’ control over their financial lives. For example:

• An employer matching design that encourages higher rates of contribution
• Automatic enrollment at a contribution rate that maximizes the employer contribution
• A default investment arrangement that is well-diversified and flexible enough to be suitable for your entire workforce

A Well-Stocked 401(k) Toolkit

There are many plan features that can add value to your retirement program. Not every feature fits every workforce or plan, but benchmarking helps you stay informed about what’s available and consider its potential for your employees:

• Roth contributions
• After-tax contributing with Roth conversion capability (i.e., “back door Roth”)
• Student loan repayment-based matching contributions
• Managed account features and in-plan advice
• Self-directed brokerage options
• A curated selection of index (passive) and actively managed investment alternatives
• Robust online planning tools and mobile app access

These features are just an example of a few resources that may be worth investigating and could be a good fit for your plan and your employees.

The Human Element

The benchmarking process is how you identify what your 401(k) plan needs to help you re-engage, retain, and recruit in this intense hiring market. Still, any resulting plan enhancements may be toothless without the human element. Someone to educate your employees on how to apply these plan features to their financial situation. Have you lined up any of the following to help you provide this support?

• Your plan advisor
• Educators from your plan service provider
• An employee financial wellness offering with access to 1-on-1 meetings

Perhaps a combination of these resources is right for your organization. Imagine describing this level of retirement program and support to your current workforce and potential hires. They will clearly see your commitment to their financial well-being.

Interested in learning more about how your plan stacks up to your peers? Check out this Fiduciary Academy titled, “Benchmarking your Plan: The Power of Asking the Right Questions.”

Investment advice offered through OneDigital Investment Advisors LLC.

Sources:
[1]Prudential, “Benefits & Beyond – The Benefits Expectation Gap”
[2]Fortune, “93% of employees say retirement benefits influence whether they’ll take a job. How to design a competitive plan”
[3]Morgan Stanley, “State of the Workplace – 2025 Financial Benefits Study”
[4]OneDigital, “OneDigital Employee Value Perception Study”
[5]PwC, “2023 Employee Financial Wellness Survey”

ID:00360873