Categories:
Low employee participation is more often driven by lack of understanding than affordability, highlighting the importance of clear plan communication and education.
When employees fail to participate in their workplace retirement plan, the default assumption is often affordability. However, recent research from Ascensus challenges that belief — and points to a much simpler explanation: employees don’t fully understand their plan or how to get started. According to the firm’s 2026 Eligible Not Contributing Employee (ELND) Survey, lack of awareness and understanding accounts for roughly 60% of nonparticipation, whereas only 23% of employees cite affordability as the primary barrier.
The Knowledge Gap: The Primary Reason Employees Don’t Contribute to 401(k) Plans
In fact, nearly one-third of employees (30%) report they do not know how their retirement plan works or how to begin contributing. For many, plan features like employer matching contributions, tax advantages and investment growth remain unclear. Without a basic understanding of these concepts, even well-designed plans can go unused. This lack of understanding highlights a fundamental disconnect: employers may believe they are providing sufficient information, but employees often find that information too complex, too infrequent or difficult to act on.
Why Early 401(k) Enrollment and Engagement Matter
The survey also underscores the importance of timing. Employees who delay enrolling are significantly less likely to ever participate. If an employee remains unenrolled for just 24 months after becoming eligible, the likelihood they will never enroll doubles. This makes the initial onboarding window critical. Without clear, timely guidance early on, employees can quickly fall into a pattern of inaction that becomes harder to reverse over time.
How Clear Communication Increases 401(k) Participation Rates
Importantly, the findings suggest that improving participation does not require costly plan redesigns. Instead, it calls for a return to fundamentals: clear, simple and timely communication. Employees respond to straightforward explanations of how the plan works, step-by-step enrollment guidance and reminders at key decision points. When information is easy to understand and accessible, employees are far more likely to take action.
How Simplified Communication Improves 401(k) Participation Outcomes
For plan sponsors, increasing participation may be less about adding new features and more about making existing benefits easier to understand. By focusing on basic education, plain-language communication and consistent engagement, employers can help more employees move from eligibility to active participation.
Informational Sources: Ascensus: “New Ascensus Research Reveals Why Millions of Eligible Workers Do Not Contribute to Their Retirement Plans,” (March 10, 2026).
Kmotion, Inc., 12336 SE Scherrer Street, Happy Valley, OR 97086; 877-306-5055; www.kmotion.com
©2026 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance, nor as the sole authority on any regulation, law, or ruling as it applies to a specific plan or situation. Plan sponsors should always consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.
This material is intended to provide general financial education and is not written or intended as tax or legal advice and may not be relied upon for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel.