Data & Research September 18, 2013

Speaking So Participants Can Understand

Saving for retirement is not something people think about, and the way people communicate has changed over the years.
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According to Michael Kiley, president and owner of PAi, Inc. a third-party administrator (TPA) and recordkeeper for the small plan market in Green Bay, Wisconsin, most people don’t want to know what the retirement industry knows. “We talk to each other by playing games and sharing humor,” he told attendees of the Plan Sponsor Council of America’s (PSCA’s) 66th Annual Conference.

For example, Kiley said his firm tested the use of lifetime income on participant statements and found something that works better. Instead of a monthly income projection, PAi communicated to participants how many years of retirement they had accumulated savings for. They also offered a mobile application that told participants “click here to get ‘x’ more years.”

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To make the message relatable, the app positioned retirement as a tangible product choice, for example, by asking participants, “Do you want a big screen TV or 2.5 more years of retirement?” In the spirit of gaming, Kiley said to tell people how to accumulate things (i.e., more years of retirement).

Kiley contended there is no coverage problem in America; there are a variety of tax-advantaged vehicles for individuals to save for retirement. But, people do not know how to “buy” these products. Kiley suggested using language individuals can relate to, just as car manufacturers did when they started measuring miles per gallon (mpg). Kiley said easier language makes it easier for people to talk to each other.

Kiley suggested giving points and rewards for good plan behavior, such as a plan coupon for correctly answering a trivia challenge or points (to cash in for rewards) for positive savings actions. In addition, plan sponsors and providers should use networks on which people share, such as Facebook. Kiley also suggested using brands people know; for example, an NFL theme could be something like “1st and 10%.”

Kiley said one rule is that providers cannot pay rewards; they cannot pay to get assets. An attendee also told the audience to keep in mind that prizes to employees may be considered taxable income.

Aside from plan sponsors using these strategies, Kiley said states should get involved and use such gaming techniques for their citizens, because their economies will suffer if retirees do not have money.

Data & Research September 18, 2013

Improving Plan Participant Outcomes

A new white paper looks at how plan sponsors can foster better outcomes for participants.
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According to Carol A. Idone, principal author of “Improving Participant Outcomes: An Action Plan for Plan Sponsors” and vice president of business development at Strategic Benefit Services (SBS) in Rensselaer, New York, the biggest obstacle plan sponsors need to overcome is employee inertia. She said, while most employees understand the need to save for retirement, they lack the expertise, desire or time to formulate and carry out a retirement savings strategy.

Idone told PLANADVISER, “I think the most important thing that plan sponsors can do to have an immediate impact on participant outcomes is to add automatic features to their plan, including both auto-enrollment and auto-escalation.” Idone noted that while the other items mentioned in the paper, such as plan options and investment menus, are important, they are predicated on people participating in the plan.

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“For those who are already participating in the plan, improving the investment menu or changing the matching formula may get them to their retirement goal quicker, or at least increase the likelihood of reaching their goal, but does nothing if someone is not yet enrolled,” she said. “I strongly feel that if a plan sponsor wanted to do just one thing to help their employees achieve their retirement goal it would be to put them in the plan and force the employee to make a conscious decision to opt out. Study after study shows most will not opt out.”

The white paper examines steps plan sponsors can take to provide greater assurance that employees will be able to generate sufficient retirement income. The paper also examines factors that plan sponsors should consider when assessing the value of the retirement plan offered to their employees.

SBS is a retirement plan consulting firm that works with finance and human resource (HR) leaders. SBS is also an affiliate of the Healthcare Association of New York State (HANYS).

A copy of the white paper can be found here.

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