Is Your 401(k) Plan a Benefit…or a Talent Magnet?

In my work with plan sponsors, I see the same pattern again and again: the 401(k) gets treated as a compliance obligation rather than as a tool that actively shapes who chooses to work for you and how long they stay. I understand why. Fiduciary duties are real, the rules are unforgiving, and it's easy for a committee's attention to stay fixed on fee benchmarking and Form 5500 deadlines.

But I'd encourage every HR director, CFO, business owner, and committee member I work with to ask a second question alongside the compliance one: is this plan actually helping you compete for people?

Those are different questions, and the gap between them is where I spend most of my time advising clients.

What Does This Mean?

The data backs up what I see in practice. Vanguard's How America Saves research which is based on nearly five million participants, shows that improvements in retirement outcomes over the past two decades track plan design, not the economy. Automatic enrollment adoption grew from just 10% of plans in 2006 to 61% by year-end 2025, and the results are stark: participants in plans with automatic enrollment reach a 94% participation rate, compared with 64% in plans that rely on employees to opt in voluntarily. Plans with at least 1,000 participants have pushed adoption even further, with 79% now using automatic enrollment.

I tell clients this isn't a coincidence. It's behavioral economics doing exactly what it's supposed to do. When I help a sponsor redesign a plan, I'm not trying to make employees more financially disciplined. I'm trying to remove the friction that keeps disciplined intentions from turning into action.

The plans I consider genuinely competitive today typically combine several of the following:

• Automatic enrollment

• Automatic annual contribution increases

• A meaningful employer matching contribution

• Immediate eligibility for new hires

• A Roth contribution option

• Ongoing financial wellness education

• Personalized, one-on-one participant guidance

I rarely see one feature move the needle on its own. It's the combination paired with how clearly it's communicated that ultimately changes behavior.

Why Should Employers Care?

Because I know what it costs you when this goes unaddressed. Replacing an experienced employee can run well into a significant percentage of that person's annual compensation once you account for recruiting, onboarding, lost productivity, and training. I've sat in enough budget conversations to know that number gets leadership's attention faster than almost anything else I can show them.

At the same time, when I talk to plan sponsors about why their employees value the retirement plan, the answer is rarely "the match formula" in isolation.  It's the sense that the company is investing in their future, not just their current paycheck. That perception compounds. The latest Vanguard data shows nearly 45% of participants increased their savings rate in 2025, pushing the average combined savings rate to a record 12.1%, driven almost entirely by plan design rather than market conditions or economic optimism. When I see that kind of shift in a client's own participant data, it's almost always traceable to a specific design change, not a change in how employees feel about the economy.

So when a client asks me whether the retirement plan is "worth the investment" compared to other benefits, my answer is consistent: it's one of the few benefits I can show you moving both your hiring conversations and your retention numbers at the same time.

Three Plans I've Watched Transform Hiring and Retention

The examples below are composites drawn from patterns I've seen repeatedly across several plan sponsors, but each reflects real design decisions and real outcomes I've guided organizations through.

The manufacturer that fixed onboarding, not attitudes. A regional manufacturing client of mine had decent intentions among hourly employees but inconsistent enrollment.  However, people meant to sign up and never finished the paperwork during their first chaotic weeks on the job. I recommended three changes: immediate eligibility, automatic enrollment at a meaningful default rate, and automatic annual escalation, paired with simple orientation materials instead of a dense enrollment packet. Within a year, participation climbed sharply and far fewer employees were leaving match dollars on the table in their first year. What struck me wasn't that employees suddenly cared more about saving, they always had. We just stopped requiring them to fight the process to do it.

The firm that didn't need a richer match. It needed better conversations. A professional services client already offered a generous match, but I noticed in the data that a large share of employees were contributing just enough to get part of the match and stopping there. Rather than touch the plan design, I worked with them to build periodic workshops, recurring office hours with me directly, and personalized projections addressing the questions I hear most often: am I saving enough, should I be using Roth, am I invested appropriately, should I consolidate an old 401(k)? Contribution rates rose, more employees captured their full match, and HR told me the plan started showing up in employee engagement survey comments unprompted. Sometimes my best recommendation isn't a new feature, but rather it's helping people understand the one they already have.

The small employer that stopped trying to out-salary larger competitors. A privately held client kept losing finalist candidates to national firms with bigger compensation budgets. I helped them redesign the plan around immediate eligibility, automatic enrollment, a more competitive match, a Roth option, and I trained their recruiters to talk about the plan during interviews rather than waiting until an offer letter. Within eighteen months, their offer-acceptance rate improved, voluntary turnover declined, and the retirement plan started showing up as a named strength in their own employee surveys. The plan had become part of how they recruited, not just something HR mentioned during onboarding.

What Should Employers Consider Next?

When I sit down with a committee for an annual review, I push them past the compliance checklist with questions like these:

Would a candidate weighing your offer against a competitor's see your retirement plan as an advantage, or as forgettable? How much friction does a new hire face before their first contribution actually happens? Are your employees saving at a rate that puts them on track for retirement readiness, or just at the minimum needed to get the match? Do employees actually understand what your match is worth to them in dollar terms? Are you offering education throughout the year, or only during a single open enrollment window? Would automatic escalation or a Roth option change outcomes for a meaningful share of your workforce? And when an employee has a real question, do they have someone to ask, or are they left to figure it out alone?

If you can't answer those confidently, that's not a failure.  It's usually the starting point of the work I do with a client.

The Bottom Line

The plans I consider strongest do more than satisfy ERISA. They reinforce the culture an employer is trying to build, demonstrate a real investment in people's futures, and give that employer something concrete to point to in a competitive hiring conversation.

I tell every client the same thing heading into their fiduciary review: don't stop at "is this plan compliant." Ask me whether it's competitive. In my experience, a retirement plan built around thoughtful design, real employer contributions, automatic features, and ongoing guidance becomes one of the most effective tools an organization has for winning the candidates it wants and keeping the employees it can't afford to lose.

This article reflects general guidance based on current plan design trends and publicly available research, including Vanguard's How America Saves. It is not legal, tax, or individualized financial advice. Plan design changes, including automatic enrollment, automatic escalation, and student loan matching, involve specific compliance and recordkeeping requirements under SECURE 2.0 and ERISA. I'd recommend reviewing any changes with your recordkeeper and ERISA counsel before implementation.

Scott Higgins | AIF ®, CFP®, CPFA®, NSSA®

Financial Advisor

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