Will Free Pizza Get Your 401(k) Participation Rate Up?

In law school, students flocked to any meeting that offered free pizza.  Free pizza got me roped into being the secretary of the environmental law club in law school, which was an area I had no knowledge or real interest in.  But they served pizza at the meetings and I was broke, so I attended!  It always amazes me that even at our law firm, people show up regardless of the topic when there is free food.  So if you provide a free meal or a gift card for a free meal, will you see a spike in your retirement plan participation?   Congress must have thought so because as part of SECURE 2.0, the law was changed to now allow employers to provide small incentives for retirement plan participation.

Prior to SECURE 2.0, employers were prohibited from providing any incentive outside of the plan for participation in their 401(k) or 403(b) plans.  The only incentive for participating an employer could provide was a matching contribution inside of the plan.  SECURE 2.0 now allows employers to provide de minimis financial incentives to those who participate in the plan.  The law doesn’t define what is a de minimis incentive, but a gift card for a free pizza, a t-shirt (unless your company hands out Gucci t-shirts) or a new coffee mug should all be fairly safe items to provide.  The incentives cannot be paid for out of plan assets though.   Will a small incentive actually increase participation?  Only time will tell, but people always seem to show up for free pizza so it may be worth a try.

This change is effective for plan years beginning on or after December 29, 2002.  Therefore, if you have a calendar year plan, you can start providing these incentives to encourage participation right away.  If you have questions on SECURE 2.0, please reach out to any attorney on our Employee Benefits team.  We are also holding a three-part webinar series to explain SECURE 2.0 in more detail.  To register, please click here.

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