Employer-sponsored retirement plans continue to offer employee participants financial stability after they leave the workforce, but often a 401(k) plan with a strong employer match is meaningless if employees don't know how to take advantage of it.
Forty-five percent of employees near retirement age do not expect to retire soon because of financial reasons, according to the Society of Actuaries. That means these employees are staying in the workforce longer. While employers strive to help smooth the transition to retirement for older employees, challenges such as widely dispersed employee populations and waning education budgets have led many sponsors to experiment with less traditional methods of education.
More than three-quarters of companies offer online tools to educate employees about retirement savings plans, according to a 2011 report by Transamerica Center for Retirement Studies. Online tools have gained in workplace popularity, especially with larger organizations. But most workforces still employ a large number of people near retirement age, many of whom prefer in-person conversations with a financial adviser or to have plan descriptions mailed home.
Online and e-learning programs are accessibile and fairly low-cost. Because the presentations are available 24/7, employees can learn about their retirement plan or get advice when it's most convenient to them. Proponents argue these systems are more engaging because employees will use them when they're interested and therefore are more likely to take action to change their asset allocation or increase their contributions.
"Online provides you significant reach at a fairly low cost. Face-to-face is expensive and could have scheduling issues," explains David Wray, president of the Plan Sponsor Council of America.
Wray believes enabling participants to interact with and pose questions to a presenter can be more effective, but he concedes that "online systems are becoming more sophisticated. We're moving beyond online calculators, which have been typical in the plan. You now have webinars where there's actual interaction electronically."
According to a PSCA survey, more sponsors are using Internet education as a retirement tool, increasing from 54% in 2009 to 59% in 2010. Webinar use has increased to 34% in 2010, up 8 percentage points from the previous year. Internet tools have become standard features on vendors' websites. But it becomes a question of how hard the employer pushes employees to those tools. According to the survey, 72% of sponsors still use an enrollment kit with printed materials to educate employees on financial issues.
Meanwhile, 53% of employers used email as the main vehicle to inform participants about plan changes in 2010, which was up four percentage points from 2009. According to Wray, some sponsors are experimenting with social media platforms, such as Twitter.
Roll up your sleeves
Education is "an area where you can never get comfortable; you are never done," says Paul Hackleman, a voting director at the International Foundation of Employee Benefit Plans. Employers need to keep "a roll-up-your-sleeves mentality," he says.
Information can be inexpensively tailored and delivered to different employee groups through online education, whereas face-to-face group meetings are more general. Many online vendors have sections easily broken up for employees to listen to at their own pace and peruse the topics they find interesting. They can pause and later revisit the learning module if they are interrupted.
The biggest drawback to any educational tool is if the participant doesn't act, says Douglas G. Prince, CEO of Praxis Fiduciary Advisors. Certain online tools that integrate action - such as asset allocation - during the online tutorial, can help spur workers to immediately apply what they've learned. However, "I don't think online will ever replace face-to-face because people learn in different ways," he says.
Employers must be sensitive to how their employee populations want retirement information. If employers decide to use online programs for retirement learning, they should research those tools as they would any other feature of, or adviser for, the plan. For example, online calculators, though nearly ubiquitous on vendor and employer websites, can be inaccurate and misleading.
Sometimes even employer online calculators may not consider assets outside of the 401(k) plan, explains Carol Bogosian, an actuary and retirement expert. Calculators may "only show a partial picture, and annuities are a big part of that picture," says Bogosian, president of CAB consulting.
When crafting retirement messaging and e-learning tutorials, Hackleman recommends benefits managers "keep information in digestible amounts" so employees can easily glean nuggets relevant to them, says Hackleman. He adds that online programs bring information home to other family members.
"E-learning gives you a measurably larger amount of flexibility and reachability. It gives you the means to broaden your audience and how your audience digests information," Hackleman says. While some participants still prefer face-to-face interactions, "the utility of that is diminishing" because of an increasing need for flexibility among busy schedules.
Annette Grabow, manager of retirement benefits at M. A. Mortenson Company, offers online webcasts and other online vendor tools to retirement participants in the Minneapolis-based construction company's 401(k) plan. But she relies on in-person workshops to drive the message home.
Grabow explains that as financial education around the retirement plan has evolved since 2003, they have found group in-person meetings to be most effective. So she and her benefits team travel to larger job sites and all company offices across the country to speak with plan participants. They give group presentations on a diverse array of financial and retirement topics, such as estate planning, budgeting, paying a house mortgage and saving for children's college expenses.
Grabow says this education program fits the company's culture because a construction job site can be too intense for employees to make time on their own to focus on retirement education.
"Because there's so much competition for their attention, I had to start doing things that were more engaging for them - where I knew they were paying attention and they could not be interrupted, so they received all the information," she says. The benefits team divides retirement topics into relevant information for participants early in their career, those in the middle and those later in their careers.
Survey employees about what they want
Using informal surveys, they ask what topics participants want more information on and how they want to receive information.
"We survey every year, and the number one request, still at over 65%, is in-person workshops," Grabow says. Forty-five percent of employees wanted to speak with a financial adviser.
Grabow says the company will soon offer participants advice online or over the phone through Morningstar. "Overwhelmingly, our employees prefer in-person [education]. About 98% of our employees surveyed say they consider these workshops to be an important part of their benefits package," she explains.
Make it fun
Despite the challenges that come with a dispersed workplace, Grabow says the benefits team works hard to make retirement learning fun with competitions where employees earn points for attending workshops that can be redeemed for prizes.
Grabow and her team draw attention to their educational programs with a catchy print campaign. "I don't send stuff home unless it's irresistible to open. That's one of my rules," she says. Her team tries not to inundate employees with too much information. Print materials sent home are always graphically interesting with pop-ups and cut outs. Emails will contain flash and cartoons. "We try to do things that are a little more eye catching," she says.
Based on closely tracked results, their efforts are paying off. "In the 2011 campaign, 88% of participants who answered our survey took action. That's the biggest thing we're after: We want to see action. We follow up with them 30 days after their workshop," Grabow says. Of those who took action, the majority performed two tasks on their lists that they drafted during the workshop. Actions often include reviewing asset allocation and making changes, using calculators and worksheets, reducing the number of expenses, increasing deferral rates and taking steps to reduce credit card debt.
M. A. Mortenson now has a 97% participation rate in its retirement plan, which Grabow credits to its education campaigns. The participation rate only increased by 3 percent points since they introduced automatic enrollment. Also, average deferral rates have gone from 4.6% to 8.1%. Most importantly, 98% of those surveyed feel more confident about making financial decisions.
"We believe education is huge and that employees can understand it - it's not rocket science. Studies have proven [education] has more of an impact on how much they have for retirement than how their investments are lined up," Grabow says.
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