Ron Cohen, Head of Institutional Defined Contribution Services, DWS, told attendees last week at the PLANADVISER National Conference that to get employees to save, sponsors should use automatic enrollment, for all employees, not just new ones. To get them to save enough, sponsors should use a default deferral percentage greater than 3%, or use automatic deferral escalation.
To get participants to invest correctly, Cohen suggested one-on-one meetings, taking advantage of personalized calculators offered by providers, and using the right qualified default investment alternative, as well as automatic rebalancing.To control plan leakage, Cohen recommended that when sponsors set up their loan or hardship distribution policies, they limit the number of loans or distributions and what money types can be taken out.
PLANADVISER National Conference panelist Chris Augelli, VP Sales Operations and Alliances at ADP, contended that one of the easiest ways to influence the retirement readiness of participants is to implement an education policy statement. It should be a plan for educating employees as well as establishing measurements of success.
Augelli said there are lots of support tools from DCIO providers and recordkeepers that plan advisers should utilize. In addition, Augelli agreed with Cohen that face-to-face personal interaction with participants makes a big impact, even more than interactive Web-based education.
Scott Buffington, Corporate VP, National Sales Manager, MassMutual Retirement Services Division, agreed that education meetings are important, but said advisers and sponsors need to look at the different ways participants want to be “talked to”–interactive Web tools, targeted mailings, and social media. Setting goals with plan sponsor clients is key, he said.
According to Buffington, the measurement of success of a plan is how many participants are set to replace a specific percentage of income in retirement. Providers are coming out with new tools to measure this, but Buffington said he thinks tolls will come out that in addition will suggest an education program and plan design changes.