In today’s job market, a competitive benefits package is no longer optional—it’s essential. Your company’s 401(k) plan plays a major role in attracting and retaining top talent, yet many employers don’t realize their plan may be falling behind industry standards.
As the new year begins, now is the ideal time to evaluate whether your 401(k) plan is still competitive and aligned with employee expectations.
Why a Competitive 401(k) Plan Matters
Employees are paying closer attention to retirement benefits than ever before. A strong 401(k) plan can:
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Improve employee retention
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Enhance recruitment efforts
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Support long-term financial wellness
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Demonstrate employer commitment to employees’ futures
If your plan hasn’t been reviewed recently, it may be missing key features that employees value.
Key Signs Your 401(k) Plan May Be Falling Behind
1. Employer Match Isn’t Competitive
Employer matching contributions are one of the most important factors employees consider. Review:
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Match percentage and limits
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Vesting schedules
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How your match compares to similar employers
A competitive match can significantly impact participation and satisfaction.
2. Limited Investment Options
Employees expect flexibility and transparency. Plans with outdated or overly complex investment lineups may discourage participation.
Consider whether your plan offers:
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A well-diversified investment menu
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Target-date funds
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Low-cost index options
A streamlined, high-quality investment lineup helps employees make confident decisions.
3. High Fees and Administrative Costs
Excessive fees can erode retirement savings and expose employers to fiduciary risk.
Employers should regularly evaluate:
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Investment expense ratios
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Recordkeeping and administrative fees
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Fee transparency for participants
Competitive 401(k) plans prioritize cost efficiency and clarity.
4. Low Employee Participation or Engagement
If participation rates are low, your plan may not be meeting employee needs.
Consider strategies such as:
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Automatic enrollment
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Automatic escalation
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Ongoing employee education
Engaged employees are more likely to contribute consistently and value their benefits.
5. Lack of Financial Wellness Tools
Modern 401(k) plans often include tools that support broader financial health, such as:
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Retirement readiness calculators
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Educational resources
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Personalized guidance
These features can significantly enhance employee satisfaction and outcomes.
How Often Should Employers Review Their 401(k) Plan?
Best practice is to review your 401(k) plan at least annually, or whenever:
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Your workforce changes significantly
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Regulations are updated
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Participation or satisfaction declines
A regular review helps ensure compliance, competitiveness, and alignment with business goals.
Start the Year with a Competitive Edge
A competitive 401(k) plan benefits both employers and employees. By reviewing your plan at the start of the year, you can identify opportunities to improve outcomes, control costs, and strengthen your overall benefits strategy.
If you’re unsure whether your 401(k) plan is keeping pace, working with an experienced retirement plan advisor can provide clarity and confidence.
The new year is the perfect time to ensure your 401(k) plan remains a powerful tool for employee success and business growth.