Healthcare and life expectancy in the United States continue to improve. For the first time in American history, the workforce is made up of people from four generations. While it’s clear that each generation has its own unique characteristics to set it apart from the next, they all want to be able to retire.
According to the 2013 Employee Benefit Research Institute Retirement Confidence Survey, workers of ages 24 to 44 are less likely to save for retirement than workers in the same age demographic 10 years ago, and only 57% of all workers say they are currently saving for retirement.1 This is a fairly unsettling number. Before we know it, 80 will be the new 65 and financing a longer retirement will be critical. But with changes in expectations and mortality, this age-diverse workforce has created new challenges for plan sponsors when it comes to promoting and communicating retirement plans to employees.
Here are 10 ideas for plan sponsors to help employees get the most from their retirement plan.
1. This is your plan. Brand it, love it, and share it.
If you, as a plan sponsor, come across as apathetic about the retirement plan you’re offering, how can you expect your employees to express any interest or excitement? One of the most disappointing statements I recently heard from a friend was, “Retirement plan communications? What do you mean? We don’t receive anything except an initial ‘you’re eligible’ announcement."
Show employees how proud you are to offer them a retirement plan. Put a spin on the company’s slogan to relate to the retirement plan, make your logo visible on retirement plan communications, or even use photos of employees or company products. Next time you make a change to the retirement plan, consider having senior management announce that change at a company meeting or forum. Making a visible effort to promote your retirement plan will demonstrate its importance to employees.
2. Create effective communication pieces using marketing strategies.
Communication pieces essentially sell the plan to your employees as an important building block to their retirement and getting them to buy in by participating. A combination of these marketing tactics can increase the effectiveness of communication pieces:
- Make your communications visually appealing but not difficult to read
- Utilize recommendations from people of authority
- Respect people’s confidential information
- Highlight figures that hit home and appeal to your employees’ rational side
- Use power words such as free, simple, new, and guaranteed
- Explain how this will affect employees directly
- End with an easy call to action
3. Target specific audiences.
As a plan sponsor you need to pick and choose what communication pieces you’re sending to which employees. Sending a 22-year-old new hire a communication piece about catch-up contributions probably isn’t going to be as effective as targeting employees who will be turning age 50½ during the current year. Likewise, sending a low savers tax credit flier to your board of directors will probably just create more recycling. Determine an appropriate audience for each communication piece and only send to that target group. Constantly bombarding every employee with information that doesn’t pertain to them won’t teach them to take your communications to heart.
Delivery method variety is important. Consider using a variety of methods including: postcards, email blasts, texts, fliers, letters, educational meetings, and benefits fairs. It’s important to remember that one person may not be as technology savvy as the next and sending a daily blast text message or constantly requiring QR-code scanning may discourage a large population of employees from reading announcements.
Don’t forget about employees that may speak another language. If you’ve ever visited another country you know how intimidating it is to try to order a meal at a restaurant. Now imagine trying to make an election for some of your pay to be withheld in another language. Make sure to provide communications/forms and assistance in appropriate languages.
4. Get your employees in the plan.
Allow employees to enter the plan on day one. New employees are excited about the new opportunity so get them enrolled from the very start. Hook them in while it’s fresh on their minds so they will be used to seeing the deduction in pay right from their first check. Delayed entry dates tend to lead to employee inertia.
5. Consider adding an automatic contribution arrangement.
The most effective way for plan sponsors to encourage participation in their retirement plans is through plan design. An automatic contribution arrangement (ACA), more commonly known as automatic enrollment, is a feature that can be added to existing 401(k), 403(b), 457, SIMPLE IRAs, and SARSEP plans. This arrangement allows the employer to automatically enroll a newly eligible participant unless the participant makes an affirmative election not to participate.
When the arrangement is adopted, the plan sponsor selects a default contribution percentage, which is automatically reduced from employee’s wages upon meeting the eligibility and entry requirements of the plan. Participants may “opt out” of this automatic contribution. Studies show most employees will leave their contribution rate at the plan default or even increase their elections. There are alternative methods of automatic contribution arrangements; refer to your plan consultant for more information.
6. Offer an employer-matching contribution.
Would you walk past a $100 bill on the sidewalk? Would you turn down a work bonus? Most would answer no to these questions. Retirement in this day and age is largely going to be self-funded; offering an employer-matching contribution is like offering your employees a bonus. If your employees take saving for their retirement seriously and contribute, you’ll add free money to their accounts. As an employee it’s next to impossible to turn that down. A recent Wells Fargo survey indicated that 85% of those with a 401(k) offering a company match contributed enough to receive the maximum match.2 Matching is an effective way to work hand in hand with employees to fund their retirement. If high turnover/low employee retention has deterred you from implementing a match in the past, why not implement a vesting schedule?
7. Provide education.
Diversification, compounding interest, pretax, Roth—the list of things for employees to understand about retirement goes on and on. As a plan sponsor these words have probably become a regular part of your vocabulary but to employees they may mean nothing. According to a Wells Fargo survey, 79% of employees want more retirement plan education.3 Keep in mind that education doesn’t have to be overly complex. Educational meetings may be as simple as a quick run-through of the provisions of your plan, explaining diversification or showing new employees how to determine when they’ve met eligibility requirements. Put out fliers explaining risk-based models, target date funds, or a glide path solution, if you have them in your plan. Reducing the number of questions employees have about the plan will reduce their fear of the unknown and therefore reduce the likelihood of putting enrollment on the back burner.
8. Help your employees transition smoothly to retirement.
I recently viewed a presentation for retirement planning education through Milliman Transition Services. If you had asked me what my ideal retirement looked like prior to the presentation I would have probably answered “not having to sit in traffic daily and being able to do whatever I want, whenever I want.” Let me tell you that presentation opened my eyes. There are numerous factors that someone nearing retirement needs to take into account. How does a retirement plan account translate into retirement income? What kind of estate, tax, and healthcare planning is needed prior to retirement? Most retirees have these same questions but no one to turn to for assistance. You’ve taken care of your employees through their work years, help them easily transition into their retirement years.
9. Improve attendance.
Providing educational meetings or benefits fairs are a great first step but it’s important to keep in mind that they are only effective if employees are in attendance to hear or see the information. Even if your benefits aren’t changing much from the prior year, it can’t hurt to host an annual review of your employer-sponsored benefit plans. If you’re hosting a meeting or benefits fair it’s wise to make the meetings mandatory, and offer food or a door prize. Chances are someone may end up signing up for the retirement plan when their original intent was only to pick up a free donut. Record the presentation or provide online access to the materials for those who may be unable to attend.
10. Make responsive action simple.
As an employee, you’re now eligible for ABC Company’s retirement plan, and you may make pretax, Roth, or after-tax deferrals into the plan. You must elect a primary and secondary beneficiary. The plan offers risk-based models, target date funds, and a do-it-yourself options. Let us tell you about each of the funds offered in the ABC Company retirement plan… Did I lose you? If so, chances are you’ve already lost your employees. When faced with too many options, people are more likely to choose not to make a choice at all.
If your communication piece requires action from an employee, make it simple.
One of Milliman’s current clients in the hotel industry recently implemented an EZ enrollment form for those employees without computer access. Twelve months later, participation in the plan had increased nearly 20%, and the non-highly compensated employee (NHCE) deferral percentage also increased 20%. Could you reduce your enrollment form down to a check box and a signature? The fewer choices a person has to make to sign up, the more likely they are to participate.
1Helman, Ruth, Mathew Greenwald & Associates et al. (March 2013). The 2013 Retirement Confidence Survey: Perceived savings needs outpace reality for many. Employee Benefit Research Institute, Issue Brief. Retrieved August 22, 2013, from http://www.ebri.org/pdf/surveys/rcs/2013/EBRI_IB_03-13.No384.RCS.pdf.
2Wells Fargo (2010). 2010 Wells Fargo Retirement Study. Retrieved August 22, 2013, from https://www.wellsfargo.com/downloads/pdf/retirementpartners/2010_Retirement_Study.pdf.
3Wells Fargo (2012). 2012 Wells Fargo Retirement Study. Retrieved August 22, 2013, from https://www.wellsfargo.com/downloads/pdf/com/retirement-employee-benefits/insights/2012-retirement-study.pdf.