The Employer's Playbook for Boosting 401(k) Participation in 2026 and Beyond

Quick answer: Employers increase 401(k) participation by combining smart plan design with clear communication. Features like automatic enrollment and deferral escalation, paired with an employer match and clear communication, simplify the process and improve retirement readiness. And thanks to the SECURE 2.0 Act, many newer plans are now required to do exactly that.

What are the Most Effective Ways to Increase 401(k) Participation?

Four proven strategies do most of the heavy lifting:

• Automatic Enrollment: Enroll eligible employees by default so they opt out rather than opt in.
• Automatic Deferral Escalation: Raise each participant's contribution rate gradually every year.
• Employer Matching Contributions: Reward employees for saving their own dollars.
• Financial Wellness Communication: Replace disclosure overload with personalized, benefit-focused guidance.

How Does Automatic Enrollment Work?

Instead of asking people to sign up, the plan enrolls every eligible employee at a preset deferral rate and directs contributions into a default investment, typically a target-date fund. Employees can change their rate or opt out at any time.

The numbers are striking: Plans with automatic enrollment achieved a 94% participation rate in 2025, compared to just 64% in voluntary enrollment plans. Adoption has exploded with 61% of Vanguard plans used the feature by year-end 2025, up from just 10% in 2006. Default deferral rates are also rising: 62% of auto-enrollment plans now default employees at 4% or higher, compared to 43% in 2015.

Requirement to know: Under the SECURE 2.0 Act, most 401(k) and 403(b) plans established after December 29, 2022, must automatically enroll eligible employees beginning with the 2025 plan year. Initial deferral rates must fall between 3% and 10%, with automatic escalation up to at least 10%. Longstanding plans, small businesses with 10 or fewer employees, and companies less than three years old are generally exempt. If you sponsor a newer plan, review your setup with an advisor.

What is Auto-escalation and Why Pair it with Auto-enrollment?

Auto-escalation automatically increases a participant's deferral rate, typically by one percentage point each year, until it reaches a set ceiling. It's especially effective when paired with annual salary increases since employees barely notice the contribution bump when their take-home pay is also rising. Without it, the savings gap that exists on day one only widens over time. 

More than 70% of automatic enrollment plans now include automatic annual deferral increases and 73.6% of those escalate by one percentage point annually. Momentum keeps employees enrolled; escalation puts that same momentum to work.

How Much Does an Employer Match Increase Participation?

An employer match delivers an immediate return on an employee's savings — essentially free money that only kicks in if they contribute. Research by The Pew Charitable Trusts found that when a match is offered, participation rises by 15 to 16 percentage points across all age groups. More than 90% of large plans now offer employer contributions and the share of job postings mentioning a 401(k) match has more than tripled since 2020, reaching 24.7% by mid-2026.

A well-structured match also improves plan compliance. When a match formula is designed thoughtfully, it helps a plan reach a targeted overall deferral rate which can improve year-end nondiscrimination testing (the IRS-required check that ensures a 401(k) plan doesn’t unfairly favor highly compensated employees over the rest of the workforce) and ease contribution restrictions on highly compensated employees. Pairing it with a vesting schedule adds a retention benefit for the employer as well.

Plan Design Features at a Glance

How Should Employers Communicate the 401(k) to Boost Participation?

A well-designed plan only works if employees understand and engage with it. Required disclosure documents are a start but they often create information overload rather than confidence. The plans with the strongest engagement go further — creating personalized experiences that guide employees through key decisions and supplement those with interactive online tools.

Think about how your employees actually like to learn. Some want in-person group meetings whereas others prefer video-guided online enrollment or a one-on-one conversation with a financial professional. Meeting people where they are makes a measurable difference. Leading employers have also reframed their 401(k) messaging around financial wellness as something that meaningfully improves employees' lives today and in retirement.

There is no one-size-fits-all approach. Effective communication must account for the specific demographics of your workforce with factors like age, income levels and financial literacy all influence what resonates. Working with a service provider who understands those nuances is key to moving the needle.

Key Takeaways

Increasing 401(k) participation is the result of layering smart plan design, meaningful incentives and clear communication. The employers seeing the strongest outcomes are those who've made saving the path of least resistance for their employees.

• Automatic enrollment: The single most powerful lever available, lifting participation rates from roughly 64% to 94% by making saving the default.
• Auto-escalation: Compounds the benefit of enrollment over time, gradually growing balances without requiring employees to take action year after year.
• An employer match: Research shows it raises enrollment by 15 to 16 percentage points and signals that the company is invested in employees' financial futures.
• SECURE 2.0 has raised the bar: Most plans established after December 29, 2022, are now required to include automatic enrollment and escalation, making compliance and plan design one and the same conversation.
• Communication is what ties it all together: The best plan features only deliver results when employees understand and trust them. Personalized, wellness-framed messaging moves people from passive participants to engaged savers.

Ready to get more out of your retirement plan for both you and your employees? Whether you're a benefits administrator navigating SECURE 2.0 compliance or a business owner looking to strengthen retention through smarter plan design, a Johnson Financial Group advisor can help. Connect with us today.