Administration

PSNC 2017: The Effect of Choice on Regret Aversion and Trust in Sponsors’ DC Plans

Enhanced active choice (EAC) is an effective communication tool that can be used to increase trust in the plan sponsor and improve DC plan enrollment and participation rates.

By Rebecca Moore editors@plansponsor.com | June 08, 2017
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Day One of the 2017 PLANSPONSOR National Conference kicked off with an engaging discussion by  Punam A. Keller, Ph.D., Charles Henry Jones third century professor of management, Tuck School of Business at Dartmouth.

According to Keller, increasingly, a significant number of adult Americans do not trust the government and the financial industry to help secure their retirement. The absence of trust puts more onus on the individual and plan sponsor to manage retirement funds. Current enrollment nudges such as opt-outs and opt-ins are insufficient to prompt trust in plan sponsors.

Keller comes from three perspectives. She said she cares very deeply about employee well-being. “You can get pretty much anything done if you find the right team. But, often, it’s not that they don’t have the right ability—other factors may hinder productivity, such as a lack of engagement and loyalty,” she told attendees. “Emotional stuff can drag you down.”

Keller is also a marketing professor, but her focus is on social marketing; she uses marketing techniques and tools for social causes. Finally, she is a behavioral scientist. “I don’t just want to change attitudes, but I want to effect behavioral change.”

How does all this apply to defined contribution (DC) retirement plans? Keller said lower trust in plan sponsors and providers requires a change in nudge features and contended that enhanced active choice (EAC) is an effective communication tool that can be used to increase trust in the plan sponsor and increase DC plan enrollment and participation rates. “EAC bestows control, reduces procrastination, and increases trust and enrollment,” she said.

NEXT: The difference trust makes, and what is EAC?

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