Your company’s 401(k) plan is more than an employee benefit. It can also provide valuable insight into the financial habits, priorities, and potential challenges facing your workforce.
While many employers focus on offering a competitive retirement plan, fewer take the time to evaluate what their plan data might be revealing. Participation rates, contribution levels, employee demographics, and engagement trends can help paint a clearer picture of how employees are preparing for retirement and where additional support may be needed.
For plan sponsors, understanding these numbers can create opportunities to strengthen retirement plan participation, improve employee education, and make more informed decisions about plan design.
1. Participation Rates: Are Employees Taking Advantage of the Benefit?
One of the first metrics worth examining is your plan’s participation rate. This measures the percentage of eligible employees who are actively participating in the retirement plan.
A strong participation rate may indicate that employees understand the value of the benefit and are taking steps toward retirement savings. A lower rate, however, could point to barriers worth exploring.
For example, employees may not fully understand how the plan works, feel they cannot afford to contribute, or simply have not prioritized enrolling.
What to look for:
- Participation rates across different departments, locations, or employee groups.
- Differences between newly eligible employees and longer-tenured employees.
- Whether participation increases following enrollment meetings or educational campaigns.
- How automatic enrollment, if offered, influences participation.
What the data might be telling you: If certain groups consistently have lower participation rates, it may be time to reconsider how retirement plan information is communicated or whether changes to enrollment processes could help.
2. Contribution Rates: Are Employees Saving Enough?
Getting employees enrolled is an important first step, but participation alone does not tell the full story.
Contribution rates provide additional insight into how much employees are setting aside for retirement. A plan may have a high participation rate while many employees contribute relatively small percentages of their income.
This distinction matters because employees who participate may still be saving less than they need to pursue their long-term retirement goals.
What to look for:
- Average and median employee contribution rates.
- The percentage of employees contributing enough to receive the full employer match, if applicable.
- How contribution rates change as employees receive raises or advance in their careers.
- Whether employees increase their contributions over time.
What the data might be telling you: If a significant number of employees are contributing below the level needed to receive the full employer match, there may be an opportunity for more targeted education.
Plan features such as automatic contribution increases may also be worth evaluating as one potential way to encourage increased savings.
3. Age Groups: Are Different Generations Facing Different Challenges?
Your workforce likely includes employees at very different stages of their financial lives. A recent college graduate may approach retirement savings differently than an employee preparing to retire in the next five years.
Breaking down retirement plan data by age group can help employers better understand these differences.
For younger employees, competing financial priorities such as student loans, housing expenses, and everyday costs may influence contribution decisions. Mid-career employees may be balancing retirement savings with family expenses, while employees approaching retirement may be focused on determining whether they have accumulated enough to support their next chapter.
What to look for:
- Participation and contribution rates by age group.
- Whether younger employees are enrolling when they become eligible.
- Contribution trends among employees approaching retirement.
- Whether employees across different age groups are taking advantage of available educational resources.
What the data might be telling you: A one-size-fits-all approach to retirement education may not address the needs of every employee.
Understanding where different age groups may need support can help plan sponsors provide more relevant education, from foundational savings concepts to retirement income planning.
4. Employee Engagement: Is Your Retirement Plan Getting the Attention It Deserves?
Employees may be enrolled in your 401(k) plan without actively engaging with it.
Engagement metrics can help employers better understand whether employees are taking an active role in their retirement planning.
Depending on the information available through your plan provider, this could include educational webinar attendance, retirement planning tool usage, account activity, and participation in individual education sessions.
What to look for:
- Attendance at retirement plan education sessions.
- Use of online planning tools and resources.
- Employee response to retirement-related communications.
- Changes in savings behavior following educational initiatives.
What the data might be telling you: If employees are not engaging with available resources, the issue may not be a lack of interest. It could be that the information is not reaching them in a way that feels relevant or accessible.
Sometimes, adjusting the timing, format, or subject matter of retirement education can help employees become more involved in their financial futures.
5. Turning Plan Data Into Meaningful Action
Collecting data is only valuable when it helps inform decisions.
For plan sponsors, regularly reviewing retirement plan metrics can reveal trends that might otherwise go unnoticed. More importantly, it can help identify opportunities to make the plan more effective for employees.
Consider asking the following questions during your next retirement plan review:
- Are employees participating at the levels we would expect?
- Are contribution rates increasing as employees progress through their careers?
- Are certain employee groups less engaged than others?
- Are our educational resources addressing the needs of our workforce?
- Are there plan design features that could help employees improve their retirement readiness?
These conversations can help move retirement plan reviews beyond investment performance and administrative updates to focus on how the plan is serving the people it was designed to benefit.
When evaluating workforce trends, employers should rely on appropriate aggregated data and protect individual employee information.
Your 401(k) Plan Can Tell a Bigger Story
A retirement plan is an investment in your employees’ financial futures. Understanding how employees use that benefit can help you determine whether it is achieving its intended purpose.
Participation rates, contribution levels, demographic trends, and engagement data each offer a piece of the picture. Together, they can help employers identify opportunities to strengthen their retirement plan and better support their workforce.
At Confluence Financial Partners, our Retirement Plan Services team works with plan sponsors to evaluate their retirement plans, identify areas for improvement, and develop strategies intended to help plan sponsors evaluate and enhance their retirement plans.
Is your retirement plan data telling you something you might be missing?
Connect with our Retirement Plan Services team to explore how a closer look at your plan could help uncover opportunities for improvement.
Important Disclosure: Confluence Financial Partners is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training. Additional information is available in Form ADV Part 2A and Form CRS at www.adviserinfo.sec.gov. This article is provided for informational and educational purposes only and should not be construed as investment, tax, legal, or ERISA advice. The information contained herein is general in nature and may not be applicable to all retirement plans or plan sponsors.