Do you want your employees to die in poverty? Yes, that’s a provocative question, but it’s a legitimate one. Today, according to Census Bureau data, one-in-ten seniors live below the poverty line, and one-in-five unmarried female seniors live in poverty. If an effective retirement saving communications program could protect your employees from this fate, wouldn’t you undertake it? Since you “own” the costs, workload and liability of operating your retirement plan, why not squeeze every possible drop of benefit out of it?
In what ways could communications protect your employees from future poverty?
- Short of auto-enrollment, the most vulnerable employees (those at lower income, lower sophistication and lower empowerment levels) generally need to be “sold” on plan participation.
- Terms such as “income replacement ratios” and “target savings rates” are an unknown language to many employees. They need “plain talk” help to understand how much they need to set aside.
- Many employees freeze up at the mention the words “investment selection”. They need help to understand the basics, even if it is limited to sorting them into suitable age or risk-based models.
- Beyond the basics, they could benefit mightily from a better understanding of the risks they face. For example, after a 30-year Bull Market in bonds, do your participants understand that the “safe”, [bond] end of your investment menu may become the riskiest? (When interest rates rise, bond prices fall.)
- Employees need help to avoid decision errors when the markets get nasty. If they panic and bail out during a severe downturn, they’re cooked.
The “3-Es” (Education, Encouragement and Empowerment) can address all of the employee challenges outlined above, and communication is at the heart of the 3-Es.
How does the employer benefit from effective retirement plan communication?
Satisfied employees might tend to be better employees, with fewer issues, and lower turnover costs. Which employee would likely be the more satisfied one?
- An employee who is being helped by the employer to build long-term financial security for themselves and their family, or
- An employee who has access to the company retirement plan, but no effective education, encouragement or empowerment.
If only every question were so easy to answer…
What about the plan’s fiduciaries? How do they benefit from effective retirement plan communications?
Fiduciaries benefit through reduced liability. An engaged, better-informed participant is likely to make better retirement plan decisions. It’s only logical that better decisions will lead to better outcomes. Good outcomes seldom lead to legal action.
How do you go about designing and executing an effective retirement plan communications program? First,understand the difference between motion and action.
Examples of “motion”:
- You tell your participants that information is available on a Web site. (What percentage of them log-in and access the information? These stats are available from your vendor.)
- You distribute “canned” – one-size-fits-all – printed materials supplied by your plan vendor. (Often “slick doesn’t stick”. Have you followed up to see how much benefit is accruing from these materials?
- The vendor sends an educator to give a canned slide show to your employees. (Is the content relevant to the audience? Are the neediest employees attending? Do positive employee actions ensue?)
- Does your plan suffer from a “lack of motion”? (Do you have any communications program now?)
Examples of “action”:
- Perform a needs analysis, and then target those needs that are identified. (You can infer a lot from the demographic reports you provider can generate, and you can seek input from a representative cross section of your employees.)
- Make the messages relevant to each of your target audiences. (Tell young non-participants about the loan feature; tell older non-participants that “it’s not too late”; tell participants with concentrated investment allocations about the benefits of diversification; tell your stable value holders about the potential long-term impact of inflation; address all of your identified needs.)
- Tailor your communications to your organization’s unique character. (Use words and images employees can relate to.)
- Identify and use the media and venues that will best reach each target audience. (Interactive information sessions – group and individual meetings and live webcasts; print – newsletter articles, posters, postcards, paycheck stuffers, statement messages, memos; electronic – email, DVDs, on-demand video)
- Make provisions for remotely located or “dark shift” employees to receive the information they need to make good retirement plan decisions. (Arrange meeting times so that evening and night shift workers can attend before or after their shifts, or arrange late night meetings to demonstrate your commitment to their future. Make sure employees in field offices or other remote workers don’t get overlooked – the web can be a great tool for delivering interactive content to many locations simultaneously.)
It’s a competitive marketplace, and plan vendors and advisors increasingly offer solutions to the communication and education challenges highlighted above. A good partner should be able to help you perform your needs analysis and formulate and execute an action plan. If your plan vendor or adviser hasn’t been proactive in this, it’s a reasonable issue to raise and dialog to pursue.
- Your plan fiduciaries will enjoy reduced liability from a better-educated and empowered workforce;
- Your organization can enjoy benefits from higher employee satisfaction and lower turnover; and
- Fewer of your employees will be doomed to spending their golden years without any “gold”.
Jim Phillips, President, and Patrick McGinn CFA, Vice President, Retirement Resources
Patrick and Jim have over 50 years of combined investment and retirement plans experience. Retirement Resources in a Registered Investment Advisor that helps employees retire with greater security, while helping employers manage workload, costs and fiduciary liability.
NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.