Increasing the Impact of Participant Statements

April 25, 2014 ( – Retirement plan sponsors can do more to increase the power of participant account statements as a retirement savings communications tool.

Amy Reynolds, U.S. Defined Contribution consulting leader for Mercer, and co-author of the paper, “Retirement Income Statements May Help Avert a Looming Crisis,” released jointly by Mercer and the Stanford Center on Longevity, tells PLANSPONSOR, “The concern is that participants have potentially lost track of the statements, and the data contained in them.” Part of the problem, she says, is a lower level of engagement from participants.

Reynolds contends when participants were sent paper statements in the past, they had a tangible reminder to review this information. Now that most plans have made statements electronic, it can very much be a case of out of sight, out of mind, she says.

Another problem is participants’ understanding of the information contained in the statements and how it specifically applies to them, contends the Richmond, Virginia-based Reynolds. “Plan sponsors need to start looking at these statements and ask if their participants can translate those numbers into an income stream for retirement,” she says. “People look at their retirement account balances and are unsure if it’s enough to live on for 20 years or so. That needs to change.”

Reynolds points out efforts are already being made by the Department of Labor (DOL) to require plan sponsors to provide participants with statements containing lifetime income projections (see “Income Projections: Showing Participants a Better Way”). Some employers are also being preemptive and moving in that direction ahead of the DOL, says Reynolds, adding, “The statements will act as a personal communication to the participant, telling them what their own account balance means in terms of an income stream during retirement.”

Reynolds adds, “Plan statements have become more like banking statements—more numbers and less explanation. Plan sponsors need to explain what these numbers mean to an individual participant, but participants also need to play a part in the process and engage more.”

As a supplement to these statements, plan sponsors should provide participants with access to online tools that use methods such as scenario modeling and mapping, Reynolds recommends. “Participants need to be shown that if they save such-and-such an amount, then it will translate into supporting them for a set number of years of retirement,” she says. She explains these estimates and projections need to factor in market conditions and how the participant saves.

Plan sponsors need to work with their recordkeepers to find online tools that are the most appropriate for the needs of their participants, as well as create an efficient learning process for participants, Reynolds suggests. For example, she says, plan sponsors may anticipate that if a participant wants to model how saving more will impact their retirement income stream, they may also wish to explore related factors such as how market conditions and using investment advice can impact things. “The numbers in the participant statement do not exist in a vacuum,” she says.

Reynolds notes Mercer’s MyView platform, as well as solutions from Financial Engines and HelloWallet, can map out individual situations and give participants guidance about how to budget accordingly.

When it comes to delivering information about these statements and tools to participants, Reynolds reminds plan sponsors it is not a case of one size fits all. “Plan sponsors need to utilize multiple strategies for engagement, moving away from a broad approach and instead using a more targeted and focused approach,” she says. Plan sponsors need to figure out who they are addressing—breaking participants into groups by age, where they are in their career, income level or job duties—and determine what method of information delivery works best for each group. This can include one-on-one meetings, videos, webcasts or print materials. For those participants with a technology preference, Reynolds advises plan sponsors to make sure content is smartphone-friendly.

A copy of the paper from Mercer and the Stanford Center on Longevity can be requested here.