Over the past several decades, the 401(k) has evolved from a supplemental benefit to the primary retirement savings vehicle for many American workers. As employer-sponsored retirement plans become increasingly important, employers are looking beyond plan participation to whether employees are truly prepared for retirement. Federal requirements to include lifetime income illustrations on 401(k) statements reflect this growing focus on retirement readiness. submission to NHRMA - How Data Can Help Employers Drive Better 401(k) outcomes.
The key to improving retirement outcomes is data. Information such as salary levels, contribution rates, and employer matching formulas can be used to estimate whether employees are on track to generate sufficient retirement income. By aggregating these results, employers can gain a workforce-wide view of retirement readiness and identify opportunities for improvement. A modest plan design change, such as adjusting the employer match, may significantly increase the percentage of employees on track for retirement.
Organizations do not need sophisticated systems to begin. Many already have valuable retirement-plan data within payroll and benefits platforms. Employers can first use data to automate eligibility tracking, enrollment notifications, and compliance processes, reducing administrative burden and minimizing errors. As their data capabilities mature, they can use workforce-level insights to encourage participation, promote adequate savings rates, and support broader financial wellness efforts.
As retirement plans continue to play a central role in financial security, employers may face greater expectations to understand and address retirement readiness within their workforce. Taking a proactive, data-informed approach today can help employees achieve better retirement outcomes while strengthening the effectiveness of employer-sponsored retirement plans.
The retirement landscape has shifted dramatically over the past several decades. Defined benefit pension plans — once the cornerstone of workplace retirement security alongside Social Security — have largely disappeared from the private sector. In their place, the 401(k) has moved from a supplemental benefit to the primary vehicle through which many American workers will fund their retirement. Participation in employer-sponsored retirement plans reached a record 86%of eligible workers in 2025, reflecting how central these plans have become to retirement security.
As the 401(k) becomes a primary pillar of retirement planning, employers’ role is extending beyond simply offering a plan. Helping employees understand whether they’re on track for a financially secure retirement is now part of the job. Federal law now requires that 401(k) statements include an estimate of the monthly income a participant’s current balance is projected to generate in retirement — a signal that employers are increasingly expected to think beyond savings accumulation to whether their workers will have sufficient income to retire.
The Employee Retirement Income Security Act (ERISA) already governs how 401(k) plans are managed, and as these plans take on greater importance, employers' fiduciary responsibility could eventually extend to whether workers are truly on track to retire.
What Data Makes Possible
Improving financial wellness and driving better retirement outcomes for your workforce starts with having the right data. More sophisticated tools and calculators are coming to the market that can generate estimates and projections, but they’re only useful with the right data inputs behind them –– things like salary ranges, contribution rates, and employer match structures.
Your broker or plan administrator can use this information to calculate a lifetime income score for each participant –– a projection of whether they’re on track to replace at least 75% of their current income in retirement, a common benchmark for a financially secure retirement. From there, individual scores can be aggregated to give employers a workforce-level picture of retirement readiness and a concrete starting point for improvement.
Consider the following scenario. An aggregate score reveals that 20-30% of a workforce isn’t on track to retire, kickstarting discussions about what targeted interventions the employer can take to improve that picture. A small restructuring of the employer match is then run through forward-looking projections, showing that a modest adjustment could boost retirement readiness across the workforce from 70% on track to 90%.
Building Toward Better Outcomes: Where Employers Can Start
Using data strategically to improve retirement readiness outcomes is a journey, and every employer’s starting point looks different. Not every organization is ready to operate at a sophisticated level right away — but anyone can start small, use what they already have to optimize their 401(k) program, and build toward better outcomes for their workforce over time.
Start with your vendors. Most of the data you need to assess retirement readiness is already sitting in your payroll system. Work with your payroll provider to understand what they are capturing and whether you’re getting the most out of that existing relationship. A knowledgeable broker can help here, working across vendors to ensure the right data is being collected, mediating between systems, and troubleshooting data.
Use what you have to streamline plan administration (101 level). Even with basic data, there are meaningful improvements employers can make to the way their 401(k) programs run day-to-day. At this stage, the focus is less on employee outcomes and more on reducing administrative burden, where data is being used to:
-Track eligibility automatically
-Send automated enrollment notifications to participants, covering communications and compliance thresholds
-Reduce the volume of transactions that land on the employer’s desk
-Minimize errors, which can be costly to correct
Each of these builds on the other to create a more efficient foundation, making the next level possible.
Improve employee outcomes at scale (201 level). With a stronger data foundation in place, employers can shift their focus from plan administration to improving retirement readiness across their workforce. This is where data becomes a strategic tool. Employers can use lifetime income scores to identify employees who aren’t participating or aren’t contributing enough, and reach out to them with personalized messaging or additional financial wellness resources. The same workforce-level data can also inform longer-term plan design decisions that support better retirement outcomes at scale.
Preparing for a Higher Fiduciary Standard
Supporting employees’ retirement readiness is about more than wellness or retention. At some point, it will likely become a fiduciary standard. As data becomes more readily available, employers should expect regulators to start asking: did you know your employees weren’t on track to retire, and what did you do about it? Taking that responsibility seriously now, before it becomes a requirement, will enable employers to demonstrate they took reasonable steps to help their workforce achieve a financially secure retirement.
-Nick Kralj, Retirement Plan Services SVP, Hub International