Many employees say more and easier to understand information about their employer-sponsored retirement plans would encourage them to save more, highlighting the need for benefit advisers to work with employers to increase retirement plan education and communications and to tailor them to an employers specific employee population.
Twenty percent of employees surveyed for Aegeons 2014 retirement readiness survey say that more frequent access to information about their retirement savings would encourage them to save more. Likewise, communications tailored to a particular employee group has had better results engaging employee participation in retirement plans than the one size fits all philosophy, according to the U.S. Department of Labors ERISA Advisory Council 2013 report on plan communications.
Unfortunately, few employers are providing enough retirement plan education and communication. In fact, 38% of Aegeon a U.K.-based retirement provider respondents say they receive no retirement communication, education or workplace support at all.
Employers have spent the last fifteen years educating the same 20% of employees who already understand investing for retirement, Lori Lucas, a financial analyst, executive vice president and defined contribution practice leader at the San Francisco, Calif.-based investment consulting firm Callan Associates told the ERISA Advisory Council last year. It is the 80% who are clueless that plan sponsors worry about.
This is particularly troublesome, since the shift in recent years from employer-sponsored defined benefit (DB) pension plans to defined contribution (DC) plans has placed the responsibility of saving for retirement with the employee.
The need for better methods of communication is paramount, the ERISA Advisory Council says, because the demographics of the population are shifting, including more women and minorities in the workplace and employee populations as a whole living longer than they did in the past.
The most successful employers at communicating retirement plan information to their employees use many channels, including print, external websites, online tools, social media and creative marketing, the Advisory Council says in its report.
Tailoring the communication to a specific employee segment includes understanding the culture and background of the workforce being targeted. The Plan Sponsor Council of America also testified to the Advisory Council in 2013 that many companies face challenges in trying to understand language and cultural factors that might be creating barriers to full participation, adding that to reduce these barriers, employers are implementing retirement plan campaigns to increase awareness.
For example, one employer, an orange juice manufacturer, wanted to increase attendance at retirement plan educational meetings, increase plan participation, increase deferral rates and encourage participants to maximize their match. The workforce was mostly made up of hourly workers working in orange groves, harvesting oranges for juice production. Ninety percent of the workers spoke only Spanish. In order to make the communication program successful, the company had Spanish speaking leaders meet with small groups in the orange groves. Announcement posters were placed on site using simple, straightforward materials in both Spanish and English to tell employees about the meetings.
As a result of bringing the meetings to the employees in the groves rather than relying on the workers to come to a meeting elsewhere 95% of the targeted group attended the meetings. Participation in the plan increased from 40% to 75% and deferrals increased from 4% to 8%.
Chart source: Aegeons 2014 retirement readiness survey
Note: Percentages on chart do not add up to 100% since Aegeon evaluated the different offerings independently of each other.
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