Industry Voices

(b)est practices: Retirement Plan Communications: Compliance or Greatness?

June 27, 2014 (PLANSPONSOR.com) - Are you speaking to your employees or just at them?

By PS | June 27, 2014
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Either can be an effective strategy, depending on what you’re trying to accomplish with your organization’s retirement plan.

A certain amount of ongoing communication is mandated, such as fee disclosure and other notices, depending upon your plan’s design. The minimal approach would be to send out what you are obligated to, in a format that meets the basic regulatory requirements, and to call it a day. The benefits of this approach are:

 

  • It’s the least expensive approach;
  • It requires the least amount of thought or work; and
  • It will receive the least scrutiny from your plan participants.

 

If you have something to hide, this is a good strategy. For example, if your plan expenses are high or if you offer a safe harbor match you don’t want employees to take advantage of, burying the information in a wad of legal jargon might be the best way to go. You might not want to encourage employees to join the plan, because new participants start with such low balances that they don’t generate enough revenue sharing to offset the recordkeeping costs.

There is, however, another school of thought, one that believes operating a great retirement plan is both the right thing to do, and that it makes good economic sense. Arguments in favor of this approach include:

  • Studies suggest employees engaged with their employer’s retirement plan are less likely to quit.  Reducing turnover expense is obviously a good thing.
  • Other studies suggest employees who feel they are on track to a financially secure future are less distracted in the workplace and consequently are more productive.
  • Others point to the high costs associated with older workers remaining in the workplace; higher compensation and health care costs, and fewer opportunities to bring in new replacement talent. Many older workers would opt to retire earlier if they had the account balances necessary to support this.
  • A successful retirement plan can be a powerful recruitment tool. You can make the case to a prospective hire that helping employees achieve financial independence is part of your organizational culture.

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