Disclosure and Education Must Go Hand-in-Hand

Sponsors of 403(b) plans are paying more attention to the role of participant education in fee disclosure regulations—opening up a big opportunity for financial professionals.

Sponsors of 403(b) retirement plans have a lot on their minds these days. With two sets of disclosure regulations right around the corner, they need to make sure they assess the reasonableness of service provider fees. And they also have their own set of enhanced disclosures to deliver to participants. 

While understanding and implementing the new disclosure regulations is a priority, sponsors’ concerns don’t stop there. Many 403(b) plan sponsors around the country are also concerned that many participants have inadequate context for the disclosures.   

After all, if participants don’t understand the value of the retirement program or participate in it effectively, fee disclosure won’t be helpful—and might even be detrimental. Plan sponsors are justifiably concerned that a lack of overall understanding might cause some participants to leave the plan or to choose investment options based solely on fees rather than also on their goals and risk tolerance.   

While this issue is important in the corporate world, it may carry even greater significance in the not-for-profit world. Not-for-profit organizations rely heavily on their retirement programs and other benefits to compete with the private sector for valued employees.  

The trend—and the opportunity  

As a result, at The Principal, we are seeing increased interest from 403(b) plan sponsors in improving retirement plan communication and education. Herein lies the opportunity for financial professionals, who can help guide prospects and clients on education strategies that have proven to move the savings needle.

What are the biggest trends? Annual 403(b) surveys from the Plan Sponsor Council of America (PSCA) have shown a steady increase in more dynamic communication and education resources and tools—from a greater use of electronic communication (email, intranet sites, webinars) to more face–to-face education. 

For instance, the use of email increased from 59.5% in 2010 to 65% in 2011. And the use of seminars and workshops increased from 41.8% in 2010 to 53% in 2011.    

Perhaps even more important, however, is that more than 50% of 403(b) plans now offer employees one-on-one meetings with a provider by appointment. That’s good news for participants.   

One-on-one meetings can take several forms. Traditionally, one-on-one education for 403(b) plan participants has meant various provider representatives would attempt to sell their products on a participant-by-participant basis, often in the cafeteria of the employer. Proponents of this approach have touted the advantages of a wide array of choices given to participants.    

Other historical structures also include provider representatives that are permanently assigned to a client and often work in an office on-site at the plan sponsor. The results of these models have often been poor overall participation rates, as well as a lack of consistent messaging from one provider representative to the next.    

Sponsors of 403(b) plan sponsors have been looking to ensure their participants understand the plan overall—as well as all their options—and to ensure that participants can put disclosure into an appropriate context. As a result, more and more recognize the importance of an overall education policy, complete with an education policy statement that includes a consistent message for all participants. One-on-one meetings, as part of an overall education plan, are proving to be highly effective.

Plan sponsors also know that a periodic review of the results is critical. Trends in tracking results have evolved from simply looking at participation rates to tracking metrics on participants’ abilities to be financially prepared for retirement—a concept also known as retirement readiness.  

Implementing an effective education program across multiple providers that encompasses these objectives is difficult, if not impossible. That’s why a single-provider model is generally best suited to successful education, especially one-on-one meetings.  

A one-on-one model   

Among participants covered by retirement plans, both 403(b) and 401(k), with services provided by The Principal who attended a one-on-one meeting in 2011:  

  • Ninety-two percent agreed to take action, and 80% completed that action.  
  • The top actions were increasing contribution rates now and committing to continue to increase them in the future. 
  • Nearly 10 times as many one-on-one participants (19%) chose to automatically increase their retirement plan contribution, compared to 2% of participants attending only a group meeting. 
  • One-on-one participants chose an average increase in their deferrals by 1% each year for five years. 


The consistent messaging, objectives and structure of the meetings, which are focused on helping participants understand and participate in the employer’s plan, are key reasons why this sole-provider approach is so successful and desirable for 403(b) plans.    

An opportunity for financial professionals, plan sponsors and participants  

Clearly, face-to-face education, especially in a one-on-one, personalized format in the context of an overall planned education policy, is one of the best ways to help participants fully understand the value of their employer’s retirement program—as well as the potential impact of not saving effectively for their financial futures. It also provides an important opportunity to show participants that there’s a lot more to evaluating a retirement program than reviewing fees.     

By recognizing 403(b) sponsors’ renewed focus on education, financial professionals can provide a critical service. And at the same time, they can demonstrate the value they bring to the overall success of the plan.  


Aaron Friedman, National Practice Leader, non-profit, the Principal Financial Group 

Aaron Friedman is the non-profit national practice leader with the Principal Financial Group, sponsor of the Profit Sharing/401k Council of America (PSCA)’s 2011 403(b) Plan Survey. A noted expert on 403(b) plan design, he has been consulting with non-profit organizations for over 19 years and has been in the retirement plan business since 1986.