401(k) frenzy: 4 keys to calming worried employees

Remember when the toughest part about having a 401(k) plan was getting employees to enroll?

Now you’re lucky if you can keep people from freaking out about their balances on a daily basis.

You can hardly blame anyone — with the nosedive the market’s taken, people are understandably worried.

At the same time you don’t want them pulling out of your plan to stash what’s left of their retirement money under their mattresses. And your Benefits and HR folks can’t spend all day fielding panicked people’s questions.

Here’s how to handle this current crisis without doling out investment advice like you were E.F. Hutton.

Encourage empathy

This shouldn’t be a tough one because odds are good that you and other finance staffers are in the same boat on this one.

As much as staffers may tire of hearing the same questions, remind them to try and be as understanding as possible.

Some employees may not even be looking for answers as much as they are a chance to vent their frustration and fears. Encourage your people to be good listeners when employees come to them.

And remind them to be careful that empathy never turns into offering investment advice.

Provide some reminders

Of course, some people may be looking for answers about what they can and can’t do to protect their savings.

Now’s the perfect time to issue a reminder on your company’s 401(k) policies, including:

• When changes to investments can be made
• Whether employees can borrow against their 401(k)s, and
• What consequences there are from withdrawing money pre-retirement.

Some companies have even, considering the current circumstances, increased the frequency of their open enrollment from quarterly to monthly, so employees can have more control over their investments.

One other key reminder: That ERISA doesn’t make the plan sponsor a guarantor of good investment performance. All it requires is that your company have a good decision-making process for choosing investments or, in plans with participant-directed investments, choosing investment options.

Disaster-proof your portfolio

Another change you might consider? Jumping on a growing trend in terms of which investment options you offer plan participants.

Recent surveys show more employers are including lifecycle funds — 58% now offer them, according to new benchmarks from KPMG.

The appeal, especially now? Investments get more conservative, the closer a plan participant comes to retirement age. Worth considering. It also sends a message to employees that you’re looking out for them.

The final thing you can offer employees? A reality-check.

No denying the current state of the market is enough to give you an ulcer. But the market has yet to reach the lowest point it did back in 2002.

Think about looking back to how your plan performed in those last tough times (if your plan’s that old) and how well it rebounded. That history might be worth sharing.

Everyone knows the market’s cyclical, but it can be hard to remember that as those balances get smaller and smaller.