National 401k day

When saving for retirement, you must have a clear goal of what you want to achieve in retirement. You should continually review your 401(k) to determine what you can do to accelerate your retirement savings. Most employers use the National 401(k) Day to review the 401(k) plan and encourage savings education among participants.

The Plan Sponsor Council of America (PSCA) launched the National 401(k) Day in 1996. This national holiday is held on the Friday after Labor Day, which is held on the first Monday of September. This means you will start the week with Labor Day (Monday), and end the week with Retirement (Friday). The National 401(k) Holiday promotes retirement savings education among 401(k) participants.

History of 401(k) and 401(k) Day

The idea of 401(k)’s was conceptualized in 1978 when Congress passed the Revenue Act of 1978. The act included Section 401(k), which allowed employees a tax-free way to defer income from bonuses and stock options. Later in 1981, the IRS introduced new rules that allowed workers to contribute to their 401(k)s through salary deferrals.

By 1990, 401(k) plans had grown to over 19 million participants and held more than $384 billion in assets. This number jumped to $1 trillion by 1996, with the number of participants increasing to 30 million.

Later in 1996, the Plan Sponsor Council of America (PSCA) launched the National 401(k) Day to promote savings education among American workers. The PSCA set the National 401(k) Day to be on the Friday after the Labor Day Monday.

In 2006, the Pension Protection Act gave 401(k)s a boost when it allowed automatic enrollment of employees into 401(k) plans. Some employers increased their employee’s 401(k) contributions by 1% to encourage savings among employees.

As of June 2021, 401(k) plans held an estimated $7.4 trillion in assets. 401(k)s represent about a fifth of the $37.2 trillion US retirement savings.

Topics Covered on the National 401(k) Day

Here are some of the topics that employers can talk about on 401(k) National Day:

Setting up savings

The employer should communicate to participants in an engaging manner to encourage a savings culture. Employees can use the National 401(k) Day to re-evaluate their retirement savings strategy to make sure it aligns with their overall goals. They can also plan their retirement based on the state where they would like to retire, projected healthcare expenses, and what they would like to do when they retire.

Reviewing 401(k) investments

Employers can use the National 401(k) Day to encourage 401(k) participants to review their 401(k) investments to check if they align with their original retirement goals. The employer may also hire financial professionals who can offer one-on-one advice to employees on how to invest their retirement money to achieve the target results.

Financial wellness

In an age where workers have dozens of bills eating into their paycheck, an employer can use the National 401(k) Day to improve the employee’s financial wellness. Most employees find it difficult to contribute enough for their retirement since they have to pay utilities, healthcare costs, pay college education, etc. An employer can encourage employees to create a spending budget every period, set savings targets, and pay off high-interest debts.

Retirement savings discipline

Employers may use the National 401(k) Day to encourage retirement savings discipline among plan participants. Usually, most employees do not maintain an emergency fund and are forced to withdraw their retirement savings when faced with hardships. Over time, the frequent withdrawals can derail your retirement goals, and you could fall below the target savings when you retire.

Retirement tools

The employer or the plan provider may use the National 401(k) Day to offer education and retirement tools to plan participants. For example, an employer may offer a retirement calculator that employees can use to estimate the amount they will need in retirement, and the amount they should contribute to reach this target.

What Plan Design Changes Can Employers Make?

Employers can use the National 401(k) Day to help participants achieve their goals. 

Here are the plan design changes that employers can make to a 401(k) plan:

Auto-enrollment

If an employer does not offer auto-enrolment to new employees, it can use a 401(k) holiday to roll out auto-enrollment to a traditional 401(k), Roth 401(k), or other employer-sponsored plans. Also, this option should include an opt-out provision to allow employees to opt out of the auto-enrollment option.

Auto increase

The employer can implement an auto increase for 401(k) contributions so that the contributions are bumped up automatically by a specific percentage each year. For example, the employer can introduce automatic increases of 1% each year until the contribution percentage reaches 10%. This option should allow employees to adjust the contribution increases each period.