403(b) Communication Takes on New Role

Retirement plan advisers have an opportunity to help 403(b) plan sponsors reach out to participants in a variety of ways.

As many 403(b) plans move to consolidate to a single-vendor platform, the role of education and, therefore, communication is shifting. In the past, education was between vendors as they tried to win over employees, and now it is more about the plan sponsor and the employees, noted Jim Sampson of NRP Financial, Inc., speaking at PLANSPONSOR’s recent 403(b) Summit. “Now these education meetings are not a sales pitch,” he said. The trend of consolidation has provided an opportunity to focus on new education endeavors in 403(b) plans, such as asset allocation, he added.

Additionally, automatic enrollment presents an opportunity to be in front of participants advisers weren’t in front of before. However, there is still a lot of inertia about saving enough. “Most people don’t know the difference between Vanguard and Van Gogh,” said Sampson.

There are two types of communications 403(b) sponsors distribute: required and non-required. Required communication might not offer much creative leeway. 403(b) plan sponsors are now required to send notifications of universal availability once a year. Also, qualified default investment alternative (QDIA) notifications must be given to people that have been defaulted annually. Suzanne Ferrari, director of Tax-Exempt Communications at Prudential Retirement, offered this tip about the QDIA communication: Even if it is handed out with the enrollment kit, keep it unbound. For instance, if the enrollment kit is in a binder, tuck the QDIA notice in separately.




The panelists mentioned the opportunity to use targeted communication strategies to reach out to different groups of participants. John Drahzal, managing director at Access Control Advantage Inc., said he uses “relevant communication”—for instance, sending a different message to 22-year-old participants than to older participants.

Plan sponsors and their advisers can use the vendor to retrieve data to prepare and measure this type of communication, noted Mark Manin, president of Cammack LaRhette Consulting. If one specific group of employees seems to have low participation, perhaps the plan sponsor needs to reach out to that particular group.

What about plans trying to educate in a multi-vendor environment? Ferrari said plans in a multi-vendor situation can still ask their vendors to educate in a non-biased situation. She said she has sat in a room with eight different vendors and come up with a monthly schedule for education.

Ferrari also reminded the audience of the importance of top-down messaging. Employees look to authority figures, so making sure the managers have the right answers and believe in saving for retirement is one effective communication strategy.

Another low-cost way to educate employees is by leveraging the education tools of the vendors—which, Sampson noted, spend a lot of money on education that never gets used. Ferrari added that a lot of education does sit on the shelf, “but now it’s more of a virtual shelf.” By using the Web, she said Prudential can provide sponsors a quick turnaround of customized educational materials for plans. That also helps when trying to reach targeted groups, she said. She encouraged plans to help vendors understand their culture and direct them.

Overall, Drahzal summed up the three methods for reaching out to participants: meetings, direct mail, and technology. Meetings can really engage employees, but it also can tricky to get people to attend, and it can be expensive. There seems to be an art to sending snail mail correctly. For instance, participants don’t want to open an envelope; research show that post cards work, but envelopes don’t, Ferrari said.


Using the Web


All of the panelists noted the future of using the Web to reach out to employees, particularly the younger generation. Drahzal noted the need to reach younger participants in a way they like to communicate. He recommended blast e-mails, which can send segmented messages. “A direct, pithy message that is relevant to them will have more legs,” he said.

He noted some other ways plans are getting out voluntary communication messages is by using blogs and Webinars. Ferrari said Prudential offers customized Webinars for plans about general education topics. Although that works better for corporate clients; there has not been as much demand from not-for-profit clients, she said.

Mobile technology is another way to send a message, as more people are receiving information through their PDA and iPod, Manin said. Sampson suggested setting up a Facebook or Twitter account to reach participants—but some audience members noted that they are not always permitted to set up those accounts. Obviously there is a compliance concern when using the Web.

Another way the Internet might be helpful to segment is by using easy survey systems such as Survey Monkey to find out what topics participants might like to hear about, Drahzal said.

There might be fancy new tools on the Web, but direct mail is still being utilized, paired with the new digital offerings. Drahzal said the concept of segmentation can go so far as digital printing, such as putting a participant’s picture on a statement. “The single greatest leverage you can find is the Internet,” he said.