QUICK FIX – American Express Offers a Nudge to Slow-Acting Employees

May 25, 2000 (PLANSPONSOR.com) - Plan sponsors now have an easy way to "nudge" procrastinating employees into active participation. American Express Retirement Services' new Quick Enrollment product was developed to overcome one of the biggest obstacles to employee enrollment - filling out the enrollment form.

Wake-up call

The Quick Enrollment form is used with employees who have been eligible for at least two months, but have not enrolled.  Lisa Hoene, vice president of employee education for American Express Retirement Services said: “Quick Enrollment is designed to make it easier to enroll those participants who may not have enrolled because the process seemed too complicated.” 

Hoene said the product was first piloted in 1997, and since then has been used with about a dozen clients.  These plans, each with between 1,000 – 5,000 participants saw participation increases ranging from 7% to 11%.

The process provides the employee with a form already completed with:

  • Name
  • Social security number
  • Address
  • Deferral rate
  • Investment election

Filling in the blanks

The deferral rate and investment elections are predetermined by the employer. However, employees have the option to call a toll-free number – or simply adjust the form – if they want to change the deferral rate or investment choices.  Otherwise they just sign the form to join the plan.  If the participant still doesn’t react, no action is taken.

To date, program customers have tended toward a 2% deferral default and designation of the most conservative investment fund as defaults.

Quick Enrollment was the result of discussions about an alternative to negative elections, where a participant is automatically enrolled unless they make an affirmative choice to “opt out” of the plan.

Hoene said that many of these negative enrollment programs result in participants who have money withheld for a couple of payroll cycles, then drop out, leaving the plan with the administrative difficulty and costs of small, stagnant balances.

Call to action

Once reminded, employees apparently don’t just blindly sign the form. Hoene said that with their “pilot” case for Quick Enrollment, nearly half of the participants who responded to the form made changes to the form, with 31% taking the time to change both the deferral rate and investment election.

– Nevin Adams         editors@plansponsor.com