PD2007: Participant Ed. in the Auto Enrollment Era: Hitting the Basics

“I believe nothing has changed,” Sheila Wales told a panel discussion at last month’s PLAN DESIGNS 2007 Conference in Chicago. “We need to educate plan sponsors that participant education is still important.”

At Transamerica Retirement Services, where Wales is Vice President and National Director of Education Services, her company is rededicating its educational efforts to help participants understand the basic importance of a retirement nest egg. “We’re trying to make it more real for them,” said Wales. “We’re taking these people and helping them understand what a dollar is going to buy.”

Another panel member, Randy Boldt, shared his experiences with educating an auto-enrolled participant base. As Motorola’s director of Global Rewards, he dealt with the company’s move in 2000 to auto enrollment.

He said the company had 95% participation before instituting the auto enrollment. Afterwards, 54% of new hires remained at the 5% default, 30% increased their deferral, 6% decreased their savings and 10% opted out. Initially, the company had a balanced fund as a default but later changed it to Financial Engines’ Personal Asset Manager, Boldt explained.

Non-participants now get an annual targeted communication from the company, he said.

Most recently, Motorola also decided to institute a managed account program with an outside provider to run the accounts for participants. The service will be offered at a number of levels and price points depending on the amount of contact desired by the participant. “We’re giving them a choice to meet with an adviser,” Boldt said.

Inviting Spouses

He also suggested plan sponsors invite participant spouses to educational meetings and that plans send educational material to the homes so spouses can also be involved there too.

Wales suggested plans with Hispanic or blue collar workers should also consider involving workplace “opinion leaders” in the education effort since some participants may be more likely to get into the plan – or stay if they are auto enrolled – if urged to do so by a trusted colleague.

Finally, John Mott, Corporate Client Group Director & Senior 401(k) Advisory Member, at Smith Barney, asserted that whatever specific educational tool a plan chooses to use, the effort won’t be easy.

“To get them to make a change, it has to be high touch,” Mott said. “With some people, you have to spoon feed them.”