Case study: Engaging employees to participate in retirement plans

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By Robert Griffith | 24 February 2015

The challenge:

A Southern California hospital group that sponsors both 401(a) and 403(b) retirement plans for physicians and clinical staff was attempting to increase participant involvement with their plans so that they would better save for retirement. There were two different issues that affected the plans. The first was that the 401(a) plan, which consists mainly of automatic employer contributions as long as the participant meets certain eligibility requirements, was not being used effectively by many employees. Because the money was put in the account without employee action, many participants did not make an investment election, and as a result, had years of contributions invested in the default fund, which until recently was a low interest-earning stable value fund. The other was that the 403(b) plan, which was designed for salary deferrals and required participants to make an active election to defer money from their paychecks to save for retirement, was being used unevenly. As is the case with many medical plan sponsors, the physicians were taking full advantage of the 403(b) plan, usually contributing the maximum salary deferrals. However, many of the non-physicians weren’t taking the time to make sure they were saving their own funds for retirement. The challenges then were to get the non-physician participants in the 403(b) to become more involved and make sure they were saving enough so they would eventually be retirement ready. Another challenge was to help more 401(a) participants make positive investment elections so that their money would earn a reasonable rate of return as compared to the low interest stable value fund.

The Milliman solution:

Every year, the plan sponsor hosts a benefit fair where employees can gather information about benefits offered to them on campus. Milliman, along with other internal vendors and external vendors, is generally invited to host a table during the benefit fair. As is typical, we would attend the fair and answer any questions employees might have about the retirement plans. We also would provide the typical forms necessary for participants to enroll or change their contribution elections. We noticed that participants generally did not want to spend extensive time at the fair completing forms, and in many cases, the participant would take the forms to complete later. This passive approach was not meeting the plan sponsor’s goal of higher employee involvement, so we made a plan to meet that goal.

Because the plan sponsor wanted participants to be more engaged, we recommended that we create a campaign for the benefit fair to encourage employees to be more involved. In conjunction with the benefit fairs, we would hold education meetings to provide more in-depth information than was available to participants visiting the table for a short time. After the plan sponsor approved the idea of this campaign, we developed a “Take Action Now” campaign based on the plan sponsor’s requests. Traditional forms made it difficult to “Take Action Now” because there were a lot of different choices to make and participants just didn’t want to take that time when walking around a benefit fair. The goal was to create a suite of “easy” forms that allowed participants to take action without having to complete a complex form. Instead of the standard four-page enrollment form, which explained the different contribution types (pre-tax versus Roth after-tax or catch-up) and listed each of the investment options, etc., we developed the easy enrollment form, which allowed participants to enroll in less than two minutes. The easy enrollment form consisted of participant identification, an option to select a set deferral percentage or fixed dollar amount (3%, 6%, custom percent, or custom dollar figure), and an option for investment elections where participants chose a risk-based model or target date fund. Because the plan sponsor also had participants in low return fixed income funds, we also created the easy transfer form. Once again, participants provided identification information, selected from the risk-based model or target date fund, and chose to change existing balances and/or future contributions. There were three simple steps. We also created two additional easy forms for participants to quickly “Take Action Now .” The first was the increase contributions form if they were actually enrolled in the plan (this time with an election of 6%, 9%, custom percent, or custom dollar figure). The second was the paperless statements election form (participants provided their e-mail addresses and identification along with their elections to receive electronic communication). Each form only took only a few minutes to complete while at our location at the fair. In past years, the plan sponsor would hold a raffle at the fair. This year, we incorporated the raffle into the “Take Action Now” initiative and held it at our table. To increase the appeal, we coupled the raffle with an “Everyone is a Winner” slogan. As a result, everyone who completed a form was entered into the drawing for a gift card and received 100 Grand (the candy bar, of course). Everyone was excited when we mentioned that if they filled out a form, we were going to give them 100 Grand. It provided for a great laugh when we handed them their bite size candy bar. (Please note that small giveaways like the candy bar and raffle do not constitute a benefit upon the employee’s election to make or not make an elective contribution which is restricted by the Internal Revenue Code ).

The outcome:

The client was eager to have participants more engaged and motivated to take positive steps towards their retirement goals. This was especially true because, at the September 30 quarter end for the non-physician group, there were 1,036 eligible participants with no account balance and 552 with an account balance. This equates to about a 34% participation rate. The client was excited about the “easy” forms and thought that the raffle would build excitement for the employees. The plan sponsor also prepared rooms and flyers so we could provide the education meetings and promote them during the fairs. We held six different educational meetings, averaging about 25 participants. Many of those participating came because they received a flyer at the benefits fair. The meetings were for about 45 minutes each, and at the end of each meeting, participants wanted to take action and complete the easy forms. We also had an increase in the number of people who engaged us during the fair. While in previous years we may have only had a dozen or so completed forms, at this year’s fair - with a “Take Action Now” and “Everyone is a Winner” campaign coupled with the easy forms - we had over 190 forms completed. The most exciting thing for the plan sponsor was the 90+ new participant enrollment forms and 50+ transfer forms. At December 31, we noticed that the number of participants entering the plan increased significantly. In the previous three quarters, the average new enrollment was 13. For the quarter ending December 31, it was 103. We also found that the participation rate increased to more than 40% at December 31, which equates to about a 16% increase in the number of active participants with a balance.

The client liked the easy forms so much that they are now used in new employee packets. The client has also requested that we only provide those types of forms in all future years we attend the benefit fairs. By continuing to use the easy forms, the client hopes to get new employees immediately engaged in planning for retirement and to continue encouraging current employees to make positive changes.