Speaking at the 2010 PLANSPONSOR National Conference, Mary Ann Holbert, Director Compensation & Benefits, Human Resources, Legacy Health System, and PLANSPONSOR’s Plan Sponsor of the Year Winner for the 403(b)/Non-profit Market (see 403(b)/Nonprofit Plan Sponsor of the Year: Legacy Health System) said when the company’s 403(b) plan had only a 52% participation rate, she and her team set out to find out why and discovered inertia, employees being overwhelmed with paperwork, and a lack of understanding of the retirement programs offered were the culprits. They set out to particularly target those match-eligible employees that were not participating, and working with their provider, designed the “Free Money Event.”
Holbert said the key was to not use retirement jargon, and to use employees’ visions of their retirement to get them engaged in planning to save, including by offering a trip during which the winner would be able to “try out” retirement. She and her team created such a buzz with their “Free Money is Coming” campaign that attendance at the two-week event was high, and holding it in the cafeterias of the company’s five locations meant the event would be hard to miss.
In addition to the on-site events, Holbert and her team used easy enrollment cards, a direct mail to non-participating individuals that described how even a small amount of money could be used to grow retirement savings. The cards included a tear-off return mailing with a check a box to select a 3% deferral to be invested in a moderate risk fund, but it also had a line to write in a different deferral rate.
The third step in their efforts to motivate participants was to adopt auto enrollment and auto deferral increase. Holbert said it was important to educate participants first so they would accept auto escalation and understand the need for it. “We are proof that auto enrollment works, it is where your organization should be, it reverses inertia,” Holbert told conference attendees.
Legacy’s 403(b) plan now has a more than 75% participation rate.
Barnaby W. Horton, Vice President, Financial Advisor, Merrill Lynch, agrees that group meetings for all locations and shifts are key to motivating participants. However, he said what makes a difference in increasing participation and keeping participants in the plan is one-on-one meetings. In group meetings sponsors should keep it simple, explaining what the retirement plan is and why it is important, and why getting match is important, giving employees a household budget worksheet to show they can afford to defer, and showing how much of savings is based on deferrals, not market returns.
Chip Morton, Retirement Plan Consultant, Fiduciary PlanReview, explained that in the larger plan market, it is difficult to be so hands-on and have one-on-one meetings, and in many cases the average worker has little understanding of retirement plans, investing, or even the need to save for retirement. With large plans automation is key, according to Morton. Plan sponsors should use auto enrollment, auto deferral increase, and auto investing vehicles. He noted that sponsors can offer advice for employees who want it through a provider or adviser.
To sustain motivation, Holbert and her team worked with their provider to develop a metrics report to monitor key metrics on quarterly basis. She said it allows them to recognizes changes to take action on before it’s too late, such as participants stopping contributions, moving money, etc. Legacy also continues to hold an annual free money event.
During the economic downturn, Holbert noted, many employers stopped their match, but Legacy, in the spirit of encouraging employees to continue to prepare for retirement, increased its match.
Horton says provider tools can be used to reach out to participants to continue motivation. In addition, sponsors should continue to offer employee meetings, get a list of those who attend and follow up.
To an attendee who said he is having particular trouble reaching Hispanic employees, Nevin Adams, Editor-in-Chief, PLANSPONSOR, suggested finding a “leader” of the group, someone who seems to influence the group, and targeting him or her to find out why the group doesn’t want to participate and to encourage participation.
Motivation and participation can be achieved only when the employer is committed to employees’ retirement readiness, Horton concluded.Audio of the panel discussion is here.