Capital Ideas^™ 
Investment insights from Capital Group

Retirement plans are one of the most important benefits employers offer. Yet for many plan sponsors, participant engagement is a persistent and frustrating challenge — even for companies with strong plan designs and generous matching formulas. Many employees still don’t fully understand how their plan works, what it offers or why it matters to them.

We believe the biggest gap in retirement success isn’t the plan design. It’s the communication behind it.

Even if your plan has automatic enrollment, automatic contribution escalation and a strong QDIA (Qualified Default Investment Alternative), communication with employees to spur engagement is still key. It’s important to highlight the value of the program so your company gets credit for offering it, strengthening the employees’ commitment to both you and your organization’s retirement plan.

As this chart shows, private sector participation rates vary by company size, based on an annual Bureau of Labor compensation report that surveys 126 million U.S. workers. Clearly, an average 50% engagement rate leaves plenty of opportunity for improvement.

With that in mind, we identified 7 tips to help boost participant engagement based on our experience working with plan sponsors. 

1. Put people in position to drive their retirement savings 

It’s important to encourage participants to engage with their company retirement plan and make them feel empowered and educated to make informed decisions regarding their 401(k) or similar account. As we will discuss later, employees in the plan will likely have a wide degree of financial understanding and comfort levels.

As a general guideline, plan sponsors should be mindful of the distinction between participant education and investment advice under ERISA. Depending on the facts and circumstances, certain communications could be viewed as fiduciary investment advice.

As a result, many plan sponsors focus participant communications on education, such as explaining plan features, general asset allocation concepts, diversification and the potential impact of increasing contributions on long-term savings, rather than individualized guidance. For a deeper dive on these subjects, a plan’s recordkeeper or financial professional is often a good resource.

2. Build engagement into your plan’s objectives

Before education comes strategy. Think about why your organization even offers a retirement plan. What are you trying to achieve? What are the objectives? The most common reason we have heard is to attract and retain talent. Starting here can help you better explain to employees the value that the plan provides — an oft-cited challenge plan sponsors have voiced in our conversations.

3. Make sure your employees know they have a retirement plan

It sounds basic. But if employees don’t know your plan exists, then they cannot get the full benefit from it. In our experience helping plan sponsors, we’ve encountered cases where employees didn’t know they were automatically enrolled in a plan or were receiving employer match contributions.

Making sure employees know they are invested in the company's 401(k) presents two opportunities: First, you can remind them about the value of the benefit the company is providing; secondly, it opens the door to educate employees who are aware of the plan but have fallen into the “set-it-and-forget-it mindset.” These are participants who haven’t reviewed or increased their contribution rate for a long time and who may be missing out on the chance to reevaluate their retirement savings.

This checklist is a good place to help assess where to start your education efforts.

4. Reinforce basic financial and retirement terms

Here is another reality to keep in mind: Don’t assume everyone is financially fluent. Many workers from the distribution facility to the executive suite are not necessarily well-versed in financial and investment terms related to their retirement plan and investing for the future.

For instance, what is a pre-tax contribution? What is a company match and how does it work? What is a target date fund? Or dollar-cost averaging? These concepts and others are common questions employees often have and should be reinforced in clear simple terms — not HR-jargon — as part of a broader communications campaign. Here are 12 retirement-related terms that can be good to share with participants.    

5. Develop relevant content to prevent message fatigue

A one-size-fits all communication strategy won’t speak to everyone. Today’s workforce is diverse, not only in age but income level, retirement savings and ethnicity. You may find better results targeting messages to specific groups from baby boomers to Generation X to millennials to Generation Z. It’s more effective to meet — and engage — them in their current stage in life.

Think about it: A person is more likely to open your email if they feel the subject line and message relates to them. Tailored content can address a Gen Zer struggling with student loans and bills, a millennial preparing to buy a house, or a soon-to-be retiring boomer wondering how best to withdraw from their 401(k) for monthly income needs.

You don’t have to do all the heavy lifting yourself. Consider using technology to cultivate timely and relevant content ideas for quarterly email campaigns. AI tools (i.e., Copilot, ChatGPT, Claude) can extract information in a retirement plan database to segment participants by age group, job title, income bracket and tenure. Your recordkeeper may be able to help extract such information.

Plan sponsors should ensure that any such tools are used in accordance with their internal policies and applicable requirements, particularly with respect to privacy, confidentiality and the use of personally identifiable information.

Also consider maintaining a message database that you can draw from, reuse or refresh over time. That way, you can leverage your efforts from year-to-year without much effort. Another tip: Peers can often convey trust and be influencers. They can be sources of storytelling and testimonials.

A testimonial could be along the lines of: “Once I understood that increasing my contribution helped me make the most of the company match, the decision felt like a no‑brainer. I wasn’t just saving more. I was taking full advantage of a benefit that’s part of my total compensation and I was surprised how little difference it made to my paycheck.”

Here’s a broad overview of what a messaging strategy might look like over the course of a year.

6. Leverage your recordkeeper and asset managers

Recordkeepers are often underutilized educational resources. Some can provide online, in-person or virtual education. They also may offer financial planning guidance, retirement income projections and suggest relevant content segmented by audience.

Also consider leveraging representatives from the asset manager whose funds your retirement plan offers. Or you can tap the financial professionals you worked with to select the plan’s investments. They can help explain the range of investment options, such as target date funds or model portfolios, and how they work.

7. Be consistent in your communication

Employee education isn’t a broadcast — it’s a dialogue. Consistency in your communication can lead to understanding, and understanding can be a call to action.

Here are several ways to maintain the dialogue:
 

• Create a dedicated email inbox for retirement questions
• Build distribution lists based on participant segmentation
• Use automated emails to follow up after educational sessions with recordkeepers, financial professionals or asset managers
• Encourage managers to remind employees about the company retirement plan
• Maintain a steady cadence of employee communications including emails, printed materials, and information sessions with recordkeepers and asset managers

Keep it simple and repeatable

A participant education program is not advanced science. Stay focused on awareness, continuous engagement and identify opportunities for personalization. In doing so, you can close the knowledge gap that prevents so many employees from pursuing their retirement goals.

A good guiding principle is: Put employees in command of their retirement by giving them the information, tools and encouragement to succeed. We believe it could result in higher participation rates and employees who feel more confident about retirement.