Merely offering
a retirement plan is not enough if plan sponsors want their participants to
fully embrace it, according to a report from Arnerich Massena, Inc.,
“Retirement Plan Best Practices: Participant Education.”
The company notes that a study by the National Institute on
Retirement Security found that the median retirement account balance is $3,000
for working-age households, and $12,000 for near-retirement households.
Thus, Arnerich Massena says, education is
critical to helping participants become aware of their plan and its critical
value to them. “Combined with effective
plan design and maintenance, education can play a significant role in
improving participant outcomes,” the company says.
The company says the first step is to take a diagnostic
review of existing educational services and tools, as well as the plan’s
objectives and goals and problem areas among participants. Arnerich Massena
says plans can work with their providers and advisers “to examine plan
statistics like the participation rate, average deferral rate, asset
allocations, usage rates of plan options and features, and average account balances.”
In short, sponsors should find out whether participants are on track for a
successful retirement.
Goals may include the following: increase participation in
the plan, raise awareness and understanding of the plan, increase deferral
rates, improve asset allocation, reduce financial stress and increase
productivity, improve employee satisfaction and help employees plan for
long-term retirement security.
By surveying participants, sponsors can find out what they
would like from an educational program. It can also reveal participants’ level
of investment and financial sophistication.
Next, sponsors should consider channels of communication,
such as online
interactive tools and webinars, paper and printed materials or
in-person events. If participants are of various ages, several methods of
delivery may make sense, the company says. Printed materials can include
workbooks, guides, posters, flyers, table tents and newsletters.
Electronic/online materials can include videos, audio presentations, websites
and email. In-person education is also important, as participants nearly always
say they prefer in-person education above all other methods—including
one-on-one meetings with an adviser, not just group meetings.
Sponsors should also be mindful of targeting
messages/education to various life stages. For those just starting out in their
careers, they may want information on student debt, saving for a house or a
car, investment basics and why saving for retirement is something they should
start now. For those mid-career, they need help calculating a savings goal,
understanding their investment strategy, and balancing various financial goals.
For those nearing retirement, they need help planning retirement income, adjusting
their investment strategy and understanding distribution options. For retirees,
they need help with managing retirement income, estate planning, budgeting and
minimum required distributions.
When designing educational materials, Arnerich Massena says,
they should be easy to read with down-to-earth language—and even entertaining.
The company suggests using characters and stories, being colorful, making it
interactive and including examples.
To succeed at all of this, plan sponsors may want to work
with their providers and/or advisers. It is also important for sponsors to
measure how successful their educational programs are, and make changes as
needed. They can do this by looking at online usage rates and surveying
participants.
This report is one of a five-part
series that Arnerich Massena issued on retirement best practices.
Other topics included plan governance, plan design, investment menu
construction and plan monitoring.
Click
here for the original article from Plan Advisor.