Client Service

When Onboarding New Participants, Keep It Simple

New ways to get younger employees engaged with the retirement plan—and keep them there.

By Sara Kelly editors@strategic-i.com | July 02, 2015
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“Inertia works for everyone,” says Matt Adamson, senior business leader of total rewards for Mastercard in Purchase, New York. Where possible, automatic plan features can be the best way to get young employees saving—engagement and proactive decisionmaking can come later, maybe after their financial literacy has improved.

When it comes to automatic plan design, says Gerald Erickson, a principal at Milliman Inc. in Minneapolis, the adviser community obviously supports these features. Still, it is important to acknowledge that while popular opinion claims auto plans are the next logical step in improving participant outcomes, “from a plan sponsor and an administrator/recordkeeper perspective, automatic plans are not easy to administrate.”

There’s a lot that goes on behind the scenes, he says, and that may include some mistakes. “I think it’s important for people to understand that it’s not as easy as just getting people to automatically go in the plan and think that’s the end of it. It does require a lot of work from the plan sponsor side, and it does require a lot of work from the recordkeeping/administrator side.”

Plan advisers should be wary of potential complications when designing their automatic features. Most retirement plan advisers are “looking at what makes the biggest impact in getting people in the plan,” Erickson says, which for Millennials may lead them to look at Roth options. “If you add a Roth feature to the plan,” he points out, Millennials that are in a lower tax bracket now can essentially “marginalize their tax hit by taking advantage of the tax-free distribution on the back end.”

Still, “a lot of Millennials are in part-time roles,” and therefore may not be eligible for automatic enrollment in the plan, notes Jinnie Olson, client service manager, also at Milliman Inc. “It’s important for them to remember that just because they’re part-time, it might not mean that they’re completely excluded from being able to participate—they might just have to meet different eligibility requirements. So, rather than working a month or two like a full-time person would, it might take them a year to get into the plan, but they should keep track of [how they can] become eligible so that they don’t miss their opportunity.” Advisers may be able to help simplify these administrative hoops and make the process of opting in easier for participants and plan sponsors alike.

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