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How to educate employees about investing in their 401k?

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  • How to educate employees about investing in their 401k?

    So, both of my employees finally started contributing to their 401k    with fixed employer contribution     . I am glad for them. However, they seem to have parked money into money market account. Not sure if they are planning to invest later (we have low-cost vanguard admiral funds, max expense ratio 0.2%).

    I want to ask them about their goals informally and the last thing I want to do is to advise them on it. But, I wonder if there is a short course or a video tutorial out there for them to get basic information. The 401k provider sent a booklet with excellent information; I doubt they read :cry: . WCI online course might be too much as they have very small amount accumulated.

  • #2
    Be careful here. You might need to get some guidance from your plan administrator as since you apparently are the employer, you likely carry some fiduciary responsibility.


    • #3
      yea, leave it alone.

      leave the WCI or Boglehead books lying around the office.

      i would be weirded out if my boss knew what i did with my 401k...


      • #4
        You really shouldn't directly advise them on anything, and I wouldn't directly approach them about it.  Proper alternatives would be to make sure you have target date funds in the portfolio.  Additionally, you can have an advisor set up model portfolios.  Anything else would likely be crossing the line, moreso because it's an employer-employee relationship.  I talk with my colleagues a lot about 401k/financial stuff, so if they want help, they approach me and I teach them basics (especially the language) and provide resources (here, bogleheads, etc).  However, I'm technically an employee still, so I don't have a fiduciary responsibility to anyone, unlike yourself.  Still, I never offer unsolicited advice.  You shouldn't either.


        • #5
          I agree with Target date funds, and perhaps that should be the default. You probably have some duty, as the employer, to provide some education and guidance, but it should not come from you. Again, discuss it with the plan administrator.


          • #6
            I have target funds & have done my fiduciary duty as plan sponsor. I agree, I am done. Thanks!


            • #7
              You have to tread carefully in this area.  That said, you could go with a qualified automatic contribution arrangement (QACA) safe harbor 401(k) plan and set the default investment choice to the target date corresponding with the employee's birth date.


              • #8
                I admire your desire to help your employees be more financially literate. Financial wellness programs have been around as a tax-free employee benefit for several years but are finally catching on. A wellness program can be as simple as having an arrangement with a fee-only financial advisor to schedule quarterly lunch and learn meetings with your staff and be available to answer questions all the way up to some of the formal programs in place for large companies.

                I think they are a wonderful idea and fill the knowledge gap between signing up for a 401k and what to do next. They also don't have to be for investment only but can include budgeting, choosing benefits, and so forth. A fee only CFP would be essential (imo) so the advisor would be impartial and not take on the engagement as a way to sell products.
                Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


                • #9
                  Perhaps you could setup a QDIA for the plan, using a td fund or maybe vanguard balanced index.
                  A QDIA is a type of investment account that meets the criteria of ERISA sec 404(c) which provides plan sponsors with a safe harbor from fiduciary liability for investment decisions made by participants in their 401k accounts. A QDIA is essentially an investment fund or option that is designated as a default fund in which participant contributions are invested should they fail to make an investment election on their own. If the QDIA meets the criteria of an approved default investment fund, the plan sponsor is not liable for the investment outcome of the fund.

                  An approved QDIA can consist of one of the following types of investments offered through a professional investment manager or an investment company registered under the Investment Company Act of 1940:

                  Target Date Retirement Fund
                  Balanced Fund
                  Professionally Managed Account