Communicating DB Change to Participants – Be Relevant, "Real"
conference audio available at http://ww2.plansponsor.com/dbsummit06audio/notice.php – free registration required
J. Randall MacDonald, Senior Vice President Human Resources at IBM, said his firm erred on the side of complete transparency when it communicated the switch to a cash balance plan in 1999. Facts laid out for its 175,000 US employees said the move was “all about labor cost reduction.” According to MacDonald, IBM showed DB plan participants the company’s position relative to competitors, and spoke about market volatility, anticipated legislative reform, and participant longevity.
In addition, the firm created a “retirement modeler” tool that showed participants their retirement benefits under the old DB plan versus frozen DB benefits plus cash balance benefits. MacDonald said participants were given a two-year notice of the change.
Brian Birmingham, Vice President Institutional Market Strategy at Genworth Financial, said relevance to participants is the key to effective communications. In addition to telling participants what the change specifically means to them, Birmingham also advised sponsors to realistically address participants’ main questions: “Why is the company making the change?” and “Is the company in trouble?”
While Birmingham said sponsors should not over-rely on the Internet for communication, as some things should be communicated via meetings, he did suggest sponsors set up micro-sites within the company’s Intranet and send personalized emails to participants with links to these sites where they can obtain personal information about the effects of the change.
MacDonald said IBM used the Internet extensively, allowing participants to submit questions about the change for which the firm guaranteed a response within 24 hours. IBM also sends a "pulse" survey to employees every other month with 24 base questions and has the ability to add up to four questions on timely issues, so that trends in employee sentiment can be identified.
When asked whether participant communication is needed from plan sponsors following the passage of the Pension Protection Act of 2006 (PPA) even if no DB plan change is made, Birmingham said sponsors should look at DB provisions of the PPA as they relate to participants to see if anything will affect them and needs to be communicated. Even if participants will not be affected, they may fear plan changes, Birmingham said. In any event, communication is a good opportunity to reinforce the value of the DB benefit.
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