Retirement may be years away, but the actions people take today can shape when and how they get there. That’s why offering employees a 401(k) is just the beginning. The bigger challenge is getting employees actually to use it.
Despite access to retirement plans, many workers hesitate to enroll. Some are unsure whether it is a benefit or how it works. Others feel like they can’t afford to contribute. And many simply put it off for later.
So, what’s one way employers get employees to participate in a 401(k)? There’s more than one, and the right combination of education, plan design and communication can turn hesitation into real momentum.
Table of Contents
Why aren’t employees participating in retirement plan offerings?
When employees skip out on a retirement plan, it’s rarely because they don’t care about their future. More often, it’s because something is standing in the way.
So, what’s holding them back? For starters, many employees lack awareness. They don’t always understand what’s offered, how it works or why it matters. If the benefits aren’t clearly communicated, they might as well not exist.
Financial stress is also a roadblock. Workers are juggling bills, debt and family expenses and may not feel they have resources to contribute – even if a 401(k) would help in the long run. And for younger or lower-income employees, retirement can feel too far away while other financial priorities loom.
Yet another common barrier is perceived complexity. The enrollment process can feel intimidating, and investment choices may seem overwhelming. Without clear guidance and support, many employees simply put it off, even if they want to participate.
Participation isn’t only determined by eligibility. Employees need clarity, confidence and ease. And that’s where the right tools and communication strategy can make all the difference.
Why does it matter if employees aren’t enrolling?
When employees don’t enroll in a retirement plan, they miss real financial advantages and earned benefits offered by their employers. Tax-deferred savings, employer matches and the power of compounding are all opportunities that pass by. Over time, that inaction might leave workers underprepared and more financially vulnerable.
Starting sooner sets employees up for success, and every small step adds up. Many experience rising financial stress, which often spills into the workplace. It can negatively impact employee performance and may increase turnover.
Low enrollment can also create issues for employers, like difficulties with nondiscrimination testing and other compliance challenges.
A well-designed retirement plan strengthens satisfaction and retention. But it only works if employees are actually using it. When participation is low, businesses lose a key opportunity to build trust and long-term engagement.
How to get more employees to sign up for a 401(k)
Getting employees to participate in a 401(k) plan doesn’t require flashy incentives. Employers need to simply remove friction, offer meaningful support through awareness and design a plan that meets people where they are.
Convenience is paramount. Automatic payroll deductions make saving feel seamless and effortless because employees never have to remember to move money or time the market. Plus, regular contributions support dollar cost averaging, which helps reduce the impact of market volatility over time.
Employees are more likely to stay on track when saving feels easy and consistent.
Ensure employees make enough to save money
Saving for retirement doesn’t happen in a vacuum. If employees are barely covering bills, a 401(k) isn’t on their radar. When wages don’t leave room for long-term planning, participation drops.
Financial and 401(k) education, emergency savings options and small initial contribution defaults create a softer entry point. These tools give lower-income employees a way to get started, even if they’re not ready to contribute the maximum right away.
Providing basic financial literacy before enrollment builds employees' confidence to take that first step. Employers should cover budgeting, compound growth and long-term value to make the plan less intimidating and more accessible.
By adding mobile access to plan tools, employers can remove even more friction, especially if the tools are already connected to the payroll and benefits portal. When employees can easily check balances, adjust contributions or view educational content on their own time, participation becomes flexible and personal.
Offer employer matching
Few things spark interest like a company match. It’s one of the most effective ways to drive participation, and one of the most underutilized perks of contributing when not clearly communicated.
A safe harbor match, for example, is simple and powerful – 100 percent match on the first 3 percent of pay, plus 50 percent on the next 2 percent. That’s “free money” for employees who contribute, and it helps plans automatically satisfy nondiscrimination testing requirements.
When employees understand the match structure, they’re more likely to contribute enough to take full advantage of the benefit. The clearer the reward, the higher the engagement.
Consider an opt-out vs. an opt-in plan
Behavioral economics tells us people are more likely to stick with a default than act on their own. That’s why automatic enrollment works. When employees are added to the plan by default, participation rises, especially among younger or first-time savers.
Enhanced plans that include eligible automatic contribution arrangements (EACA) or follow SECURE Act safe harbor 401(k) provisions can simplify compliance while driving enrollment. These design options remove friction and set up employees for success from day one.
Opt-out plans don't force savings – they make it easier to start. That subtle shift can change the course of someone’s financial future.
Provide a dedicated benefits counselor for questions
Retirement planning is personal. Employees often have questions but hesitate to ask or don’t know where to begin. That’s why having a human point of contact matters.
A dedicated benefits counselor makes a big difference. They can walk employees through enrollment, explain investment options and provide one-on-one support. ADP’s retirement counselors are trained to simplify complex decisions and help employees feel confident in their next step.
When real people are available to guide the process, more employees get off the sidelines and into the plan.
Make enrollment easier and consider removing waiting periods
Every delay is a missed opportunity. When new hires must wait months to become eligible or when enrollment is buried in paperwork, many never sign up.
Streamlining eligibility rules and offering digital onboarding tools can change that. A clear 401(k) eligibility letter to employees, paired with intuitive online enrollment, helps them act while they’re still in decision-making mode.
The easier it is to get started, the more likely employees are to build lasting savings habits. Simplicity fuels participation.
How to communicate the value of 401(k) plans
A great retirement plan only works if employees understand it. Communication isn’t just about reminders or checklists. It’s about helping workers see what’s possible and why it matters, especially for those who may have never saved before.
To boost enrollment, employers need more than one email at open enrollment. Retirement benefits messaging must meet people where they are, speak their language and show them a future worth saving for.
Sample 401(k) communication to employees
Not all employees think about retirement the same way, and communications shouldn’t treat them like they do. Persona-based messaging helps employers reach different groups with real and relatable examples.
For example, communications can be segmented for a 25-year-old balancing student loans, a mid-career employee catching up on savings or a new parent thinking about long-term security. When employers paint the picture with real-life scenarios, people are more likely to connect and enroll.
It’s also important to use language that empowers. “You have the opportunity to invest in your future starting today” lands better than a generic reminder to log in. Personalization often leads to more engagement and participation.
Provide detailed materials
One-size-fits-all doesn’t work here. Employees need tools they can explore on their own terms, at their own pace. That means more than just PDF files. Employers must use visuals, short videos and interactive tools that break down key concepts into bite-sized, digestible pieces.
ADP’s resources like Achieve and MyADP Retirement Snapshot® help make that happen1. Employees can run scenarios, track their savings progress and get quick answers without getting overwhelmed.
Employers can pair those tools with plain language and supportive messaging. It also helps to reinforce how the 401(k) fits into overall financial wellness. The more accessible the content, the more confident employees feel about enrolling.
Encourage education
Even the best plan can be intimidating if people don’t understand how it works. Ongoing 401(k) education through workshops, webinars or e-learning turns hesitation into confidence.
Topics like goal setting, investing basics and tax advantages can help employees connect the dots. And when those lessons are tied to real-life milestones – like turning 30, getting a raise or starting a family – they become even more powerful.
The more employees learn, the more likely they are to participate and stick with it. 401(k) education for employees builds trust, and trust drives action.
What employers need to know about the EACA mandate
Boosting participation is a best practice, but it’s also becoming a regulatory priority. The Eligible Automatic Enrollment Arrangement (EACA) is a plan design feature that encourages 401(k) employee enrollment while helping businesses comply with evolving retirement legislation.
An EACA allows employers to automatically enroll eligible employees into the 401(k) plan at a default contribution rate. Employees can opt out, but the default makes participation an easy choice. It also gives employees a window, typically 90 days, to withdraw contributions if they change their minds.
This structure pairs well with a safe harbor 401(k), which includes required employer contributions and eliminates certain annual testing requirements. With the SECURE Act and its updates, Congress has signaled strong support for automatic enrollment and escalation.
In fact, under the SECURE 2.0 Act, most new plans will be required to include automatic enrollment. EACA offers a compliant, employee-friendly way to stay ahead of the curve and build stronger participation at the same time.
Consider a new and different approach
If participation is flat, it might be time to think beyond the basics. Today’s workforce is diverse – in age, background and financial goals. That means a one-dimensional 401(k) won’t cut it. Modern plans need flexibility, relevance and features that reflect how people actually live and save.
Adding Roth contribution options gives employees more control over how their money is taxed because they can pay now or pay later. For employees managing student debt, SECURE 2.0 provisions allow employer matching contributions based on qualified student loan payments. That means workers can save for retirement while paying down loans without having to choose between the two.
Beyond plan design, employers should think about how they communicate benefits. A younger workforce in tech may want mobile-first tools and gamified learning. Professionals in financial services might want deeper investment detail. A manufacturing workforce may need bilingual resources and in-person walkthroughs.
A “new and different approach” isn’t about reinventing the wheel. It’s about meeting employees where they are – with the tools, flexibility and relevance that turn a retirement plan into something worth engaging with.
Benefits of increasing participation
Getting more employees to join a 401(k) plan isn’t just good for them. It’s also good for business. Higher participation strengthens financial wellness across the workforce and unlocks real advantages for the company, too. From retention to cost savings, engagement in the plan delivers value at every level.
Here’s what’s at stake when more people get involved.
Improved employee satisfaction and retention
When employees feel confident about their financial future, it shows. Retirement readiness may create peace of mind, which translates into better focus, stronger morale and greater company loyalty.
Employees who engage with their 401(k) are more likely to feel their employer is invested in their long-term success, and that sentiment plays a big role in retention.
Tax benefits
401(k) participation offers tax wins on both sides. Employees benefit from pretax contributions or tax-free Roth growth, depending on how they choose to save. Employers can deduct matching contributions, and may qualify for tax credits in some cases, especially when implementing automatic enrollment. The more employees participate, the more these tax advantages come into play.
Lower fees
Higher participation often leads to lower costs. Spreading administrative fees across a broader base makes the plan more cost-effective for everyone involved. When more eligible employees contribute, plan assets grow, and that can unlock better pricing tiers with recordkeepers, advisors or investment providers.
Avoids perception of inequity
When more employees join a retirement plan, it becomes a benefit that everyone can feel connected to. And when participation is high, the benefit feels inclusive for everyone, not just leadership or higher earners.
Inclusive strategies, like automatic enrollment and clear education, help employees feel seen, supported and valued.
Competitive advantage
Retirement plan benefits are a top priority for job seekers, especially younger workers. A strong 401(k) can help companies compete for such talent.
Frequently asked questions
What makes joining a 401(k) so hard?
For many employees, the biggest hurdle is simply not knowing where to start. Financial jargon, plan highlights and unfamiliar investment choices can make the process feel overwhelming. Without support, people often default to inaction – not because they don’t care, but because they’re afraid of making a mistake.
Some employees also worry they can't afford to contribute. Without a clear understanding of how matching works or how small contributions grow over time, the benefits may feel out of reach. To address these issues and turn confusion into confidence, employers can provide financial literacy, step-by-step guidance and real-life examples.
Can you force employees to contribute to a 401(k)?
No, contributions to a 401(k) must always remain voluntary. However, employers can implement automatic enrollment, which adds eligible employees to the plan by default and starts their contributions at a preset rate (often 3 percent of their salaries).
Employees can opt out or change their contribution amount at any time. Automatic enrollment simply removes the burden of initiation, helping more employees start saving earlier. It’s widely supported by behavioral finance research and encouraged by provisions in the SECURE Act and SECURE 2.0.
Automatic enrollment doesn’t remove choice. It just gives employees a better starting point.
What is the 1,000-hour rule for a 401(k)?
The 1,000-hour rule is a common eligibility standard used in many retirement plans. It means that once employees work 1,000 hours over a 12-month period (roughly 20 hours a week), they’re eligible to join the 401(k). This rule is meant to focus participation on longer-term employees.
However, newer legislation is changing how eligibility works. Under SECURE 2.0, employers must allow long-term, part-time workers – those who’ve worked at least 500 hours in three consecutive years – to participate in the plan.
Employers looking to improve participation may want to revisit waiting periods altogether. Offering immediate or early eligibility sends a strong message that everyone is invited to plan for the future.
Who cannot participate in a 401(k)?
Employers have some discretion in setting eligibility criteria. Typically, employees may be excluded if they’re under 21 years old, haven’t met the required service period (such as the 1,000-hour rule), or are part of certain job classifications not covered by the plan.
However, rules are evolving. SECURE 2.0 is expanding access to long-term, part-time employees, making it harder to exclude large workforce segments.
Employers should regularly review eligibility rules to confirm they’re aligned with their business needs and not unintentionally limiting participation or creating inequities across their workforce.
Participation is the new metric that matters
Employers can’t measure a retirement plan’s success just by offering one. The real impact comes when employees show up, opt in and start saving. Participation is what turns a benefit into a real advantage for people and the business.
Creating that kind of engagement takes intention, clear communication, thoughtful design and support that feels personal. When all those pieces come together, a 401(k) becomes more than a benefit. It becomes a reason to stay.
ADP delivers what you need to effectively manage retirement benefits and help employees meet their saving goals.
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1MyADP Retirement Snapshot(R) makes no assumptions about your tax status or savings and should not be used as the basis for any planning decisions. The likelihood of various savings outcomes are hypothetical, do not reflect actual investment results or market fluctuations and are not guarantees of future results. Results may vary potential savings scenarios, with each use and over time.
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ADP Inc. owns and operates the ADP.com website. Unless otherwise disclosed or agreed to in writing with a client, ADP, Inc. and its affiliates (ADP) do not endorse or recommend specific investment companies or products. Please consult with your own advisors for such advice. Investment options are available through the applicable entity(ies) for each retirement product. Investment options in the “ADP Direct Products” are available through either ADP Broker-Dealer, Inc. (ADP BD), Member FINRA, an affiliate of ADP, Inc., One ADP Blvd, Roseland, NJ 07068 or (in the case of certain investments) ADP, Inc. Only registered representatives of ADP BD may offer and sell ADP retirement products and services or speak to retirement plan features and/or investment options available in any ADP retirement products.
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