Panelists discussed ways to improve savings rates and raise consciousness among retirement plan sponsors as well as plan participants.
“You can’t plan if you’re just an accumulator,” said George Revoir, senior vice president, distribution, John Hancock Financial Services. The mindset of participants and of the industry needs attention, and sponsors need to develop strategies that examine motivation and activity. “We have to make decisions as an industry, as a as a provider, as a vendor, decide what a saver is,” Revoir said. Some of the decisions are what we’re going to market, and what do participants need to do to get to retirement readiness.
Stuart L. Ritter, vice president and certified financial planner, T. Rowe Price Retirement Plan Services Inc., was critical of the 3% deferral. “Saving 3% for retirement is like going to the gym for 6 minutes,” he said. The goal should be 15%, according to Ritter. “We don’t design plans,” Ritter said. “We design outcomes. More people, saving more money and being more successful.”
Participant action and plan design are the two ways to create change, said Kris Gates, assistant vice president, marketing communications, MassMutual Retirement Services. If someone has a dollar of income, they can spend it or save it. Examining the consumer goods industry to see how they get people to spend money can yield some insight into how to influence behavior. “We should use the same tactics to get them to save,” Gates said.
A panel attendee asked for new ideas and specific examples that can increase participation. One sponsor treats enrollment like a health care plan: participants have to consciously opt out, Connell said. The same sponsor uses incentives such as raffles for those who sign up. Prizes can be gift cards or a day off, and anyone who is enrolled is eligible to participate in drawings, not just new enrollees.
Gates noted that a relationship manager once dressed as a chicken and visited plan participants holding a basket of retirement eggs. Revoir mentioned a small-plan sponsor who matched employee contributions up to 6% and took personally every employee who did not participate, asking to be told the name of every employee who was not participating so that he could talk to them and find out why.
A member of the audience asked about the idea of a re-enrollment that would default all participants into a target-date fund and have them opt out in order to increase participant enrollment.
In a perfect world I’d auto-enroll everyone at 10%,” Revoir said. But the key to raising participation is getting people in as early as possible, he pointed out.
Another audience member wondered if participants would be angry at auto-enrollment features. “What we hear from our participants is thank you,” Ritter said, “not pitchforks and torches.” Discussions about participation need to be framed properly.
According to Gates, MassMutual’s research on participant viewpoints showed that auto-enrollment is popular with most employees who said that saving for retirement was on their to-do list, and they like having someone do it for them.