Education Program Increases Participation in Workplace Plans

A workplace investor education program field tested in three states increased employee participation in workplace savings and investing programs, its creators claim.

“Investor Education in Your Workplace” (IEiYW), a project of the nonprofit Investor Protection Institute (IPI) with support from the Investor Protection Trust and carried out jointly with state securities agencies and the National Credit Union Foundation (NCUF), is a 10-week online training program. 

Results among nearly 8,500 employees in Pennsylvania, North Carolina and Wisconsin included: 

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  • Up to 50% increases in short- and long-term saving and investing activities;  
  • Up to 40% improvement in investment knowledge measured through pre- and post-testing;  
  • Up to 50% improvement in participant attitudes and behaviors, including increased financial well-being, setting investment goals, implementing a budget, and starting/increasing contributions to 401(k), IRA or equivalent plans;  
  • More than 80% of participants completed the entire 10-week program; and  
  • Nearly all (96%) said they would like to participate in additional programs. 

“The answer to the question of how to get more employees to participate in workplace saving and investing programs is much sought after in the world of investor education,” said Don Blandin, IPI’s president and chief executive. “The good news here is that we now have a much better handle on what works.”

IEiYW is expanding to the District of Columbia and seven states:  Alaska, Colorado, Iowa, Michigan, Oklahoma, Vermont and Washington. Additional state securities agencies are being encouraged to participate in the Investor Education in Your Workplace program this fall. Informational webinars about the fall program, including detailed program results, will take place in May. Webinar information is available at http://www.investoreducationinyourworkplace.org.   

 

Report Calls for 10% to 16% DC Plan Contributions

 

Target income replacement ratios should be higher than the 70% to 75% conventionally accepted as a rule of thumb, the Retirement Advisor Council contends.  

 

 

In a position paper, the Council says the higher ratio is to account for the projected cost of health care in retirement, and traditional financial planning concerns such as personal health, children’s educational needs and the cost of caring for elderly relatives. Regardless of target income ratio, the paper calls for consistent contribution levels to 401(k) and 403(b) plans in the range of 10% to 16% of pay over a 30- or 40-year career.

To measure retirement readiness, Council panelists suggest a two-pronged approach: one measure based on income replacement ratios for younger participants with a decades-long horizon to retirement, and a different set of measures for those with limited savings and a shorter time frame. The paper also touches on the tools with the greatest impact on participant behavior. For automatic enrollment, the six panelists advocate for a default deferral election in the range of 6% to 10% that far exceeds the 2% to 3% many employers adopt out of fear of disruption, which experience suggests is unfounded.

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“Intuitively, when we’re working with an employer going from a DB-centric to DC-only, the percentage we’re starting at in recommendations of 6% to 8% for everybody. The goal is to be at 10% average deferrals in two to three years,” said Council member Jim Robison, principal of White Oak Advisors.

The paper is based on the transcript of a discussion among Council members Robison; Phil Callahan, managing director at Goldman Sachs Asset Management; Gene Huxhold, senior managing director at John Hancock Mutual Funds; Peggy Santhouse, vice president at Diversified; and Jon Shuman, vice president at MassMutual. The discussion was moderated by Steve Davis, regional vice president at The Hartford.

The full position paper, “Enhancing Retirement Readiness: Consensus on a Course of Action,” is available at http://www.dcpicadvisors.com/positions.html.  

 

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