Retirement plan sponsors should spend as much time developing an education policy statement as they do an investment policy statement, according to industry experts. Having a good communications plan in place can have a positive effect on employee retirement readiness, says Jeffrey Hemker, national sales manager for Invesco’s retirement division.
And while there are many companies that view plan communications as an obligation, rather than an opportunity, “you have to get past that and understand the value of a 401(k) plan. There is a lot of expense and time that goes into 401(k) plans, but not every sponsor sees the value it brings to employees or gets that concept across to them,” he says. “Part of the process is getting buy-in from plan sponsors about what are the key benefits for them and how they benefit from higher participation and people with higher account balances.”
If people don’t have enough money to retire, they will continue to work, which poses problems for some employers, including paying higher wages and having higher healthcare costs that come with an older workforce.
“We hear from plan sponsors that having an effective communications program is useful. We heard from our sponsors that 93% have seen communications be helpful and effective. It starts with being proactive in your communications,” says Blake Bostwick, chief operations officer for Transamerica.
One way to get employees to buy into their workplace retirement plan is to have a written education policy statement that sets communications goals for the plan: What a company hopes to do and how they are going to accomplish it. Since plan vendors and companies both send out messages, they need to be consistent, says Hemker.
Transamerica introduced a model education policy statement in 2011 to help plan sponsors customize one for their own retirement plans.
“It is a valuable plan management tool,” says Bostwick. It allows plans to document their employee education efforts from a fiduciary standpoint, but it also offers a blueprint for meeting the needs of all eligible employees.
“You have to map out a strategy to set goals and track and measure those goals,” he says, adding that a good education policy statement will include a list of objectives and intended measurable results that will have an impact on employee retirement readiness, including participation rates, deferral rates, account balances and asset allocation.
It is up to the plan sponsor to sit down with their retirement plan vendor to discuss a consistent message. That means delving into groups of workers based on age, income and contribution rates and deciding how to specifically address the problems inherent in those groups.
“The only way that works is if you monitor and manage the results,” Hemker says.
Plan sponsors also need to re-evaluate all of the channels they use to communicate with plan participants. Email, paper, Facebook, Twitter, participant meetings and websites are all ways in which plans can communicate messages to their employees. Of course, companies can send all of the messages they want, but the challenge remains getting employees to read the messaging and respond somehow.
Most email messages will probably be read on a smartphone, says Hemker, so the message needs to be concise and include links to where a plan sponsor wants to direct participants’ attention – for instance, a page where they can take action on their account.
The subject line has to be enticing as well, or nobody will open the email.
The time of day the message is sent is also important, Hemker says. If you want employees to receive a specific message, 4 p.m. on a Friday is not the optimum time to send it. Mondays are generally bad, too, because most people are trying to catch up after the weekend. Tuesday mornings are a great time to send out plan communications, he believes.
“When I look around, everybody has a smart phone in hand and they are taking a look at it. It creates an opportunity from a communication and education standpoint that we didn’t have five years ago and we have to understand that and address that,” says Hemker.
If messages are tailored to the plan participants, it is not uncommon to see savings rates increase 3-7%, according to Bostwick.
Quote“In this new paradigm, we have to be digitally focused.”
“In this new paradigm, we have to be digitally focused. More and more employees at the plans are looking for better connectivity through digital means,” he says.
That has driven an increase in mobile apps. Transamerica developed a retirement app that allows plan participants to look at their retirement plan balances, check fund performance, their vested balance and retirement outlook. Participants can also input information about their finances and future goals and the app will project their future success, he adds.
Transamerica continues to find new avenues to provide education to employees. It produces posters with QR codes that can be placed strategically in company lunch or break rooms. Employees with smartphones can scan the codes and watch short engaging videos on various financial topics.
Most large plans – those with more than $50 million in plan assets – have an education policy statement in place.
“What we need to do is bring it down market, like everything else in the retirement world,” says Hemker. “I think we are seeing it come down market at this time. A lot is driven by advisers and platforms [that] understand that we need to make this successful.”
Quote“What we need to do is bring it down market, like everything else in the retirement world.”
Once an education policy statement is in place, it is up to the company to review it annually, semi-annually or quarterly. Most retirement plan platforms have the ability now to monitor how many emails are opened, how many people visit a website and what activity is taking place on a demographic basis.
The message companies should be sending to employees is that “anything you can save between now and retirement is only going to help you,” says Hemker. “Pay off your credit card debt. Don’t have that burden hanging over you.”
Many retirement tools out there send the wrong message, he adds. They ask employees what they want to do in retirement. Many focus on things like traveling around the world or shopping. But if a participant just wants to have enough money to live on, eat out occasionally and spend time with family, that requires a smaller income replacement rate than someone who wants to do things they don’t already do, like travel around the world.
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