8 Ways for Plan Sponsors to Increase Participation and Employee Deferrals
In a recent whitepaper, we identified elements of successful Financial Wellness Programs and encouraged plan sponsors to adopt best practices to achieve long-term success. Many plan sponsors recognize that wellness programs are important to improve participation, to help participants reach their retirement goals, and to avoid “leaving money on the table”. Research shows that wellness education can have a long-term impact on a participant’s financial health. Because of this, sponsors want to take immediate steps to increase participation and make sure employees take full advantage of their retirement benefits.
Increasing participation is an admirable goal, and for some employers, there is a strong desire to invest in employees in order to retain them. Health insurance and retirement benefits can be a differentiator for an employer—employees who feel secure and valued may stay employed and engaged longer. Often times an employer will feel morally obligated to help employees prepare for the future, and with employee populations progressing toward retirement age, it’s in an employer’s best interest to help them retire on time.
Here are some ways we’ve seen plan sponsors use elements of plan design and communication to successfully increase participation and deferrals:
1. If you haven’t adopted automatic enrollment and auto–escalation, consider it.
This simple plan feature has proven to be a highly effective way to dramatically increase participation.
2. Look carefully at how you structure the match.
We’ve seen plan sponsors move away from matching 100% of employee deferrals up to 3%, many now matching 50% of employee deferrals up to 6% instead. While the corporate outlay for the match is the same, for participants to get the full match, they need to save more. Sharing illustrations of what this means for employees can be very impactful, as it may only mean setting aside a few extra dollars a week.
3. Communicate effectively.
Be sure to put engaging and creative information in front of participants as regularly as possible. By getting in front of them more frequently, you can catch people’s attention when they are ready.
4. Keep enrollment as simple as possible.
Make it one “click” so people can sign up right on the spot. When planning education events, encourage attendees to sign up right away or within 3 days. Our experience is that if participants don’t act within that window, they likely won’t act at all. Remind them what they will miss out on if they don’t take action.
5. Think carefully about naming a “go-to person” for the 401(k) plan.
Does that person have good energy and are people willing to talk to him or her? Find someone who is a 401(k) evangelist or advocate—a Suze Orman or Dave Ramsey-type who has that personal finance passion or is a trusted uncle. Avoid appointing a shy HR person who is unapproachable.
6. Create a small budget for fun educational activities.
One retirement plan representative sends out a monthly quiz about retirement planning and awards a Starbuck’s gift card to those who get all the right answers. Send out a “question of the week” and give an award to the first right answer. Hold educational events and offer treats. Make it interesting, comfortable and accessible.
7. Use tools like Kahoot! to create competitions and increase engagement.
Divide employees into two groups and let them compete to answer trivia questions related to your plan. Alternatively, create a quiz with questions about retirement planning, taxes when you withdraw money, the impact of tax-deferred growth, or other investment topics. Incorporate information about budgeting or credit scores, or other information that affects overall financial wellness. Give the winning team a suitcase full of 100 Grand candy bars.
8. Create one-on-one opportunities for employees to talk about their 401(k) benefits.
Give employees the opportunity to ask questions and discuss their personal situation, using translators if necessary. Show them illustrations on the computer or help them to sign up. Offering someone who can speak to employees in their native language can be very helpful.