Though we take our own individual paths, most everyone ultimately makes a journey to nonworking years—-aka retirement. Since preparing for those years is essential for all of us, why do retirement plan communications tend to use so much convoluted and off-putting terminology about participating? Read on for pointers about scrubbing the jargon and increasing engagement.
Language Matters
Of course it is important for company sponsored retirement plans, like 401ks, to attend to rules and regulations ensuring employees are well informed about their savings opportunities. That doesn’t mean, however, that communications have to be bogged down with overly complex explanations, and meaningless, jargon-filled phrasing. Language does in fact contribute to the success of saving for retirement, and most communications could benefit from a clearer, more engaging, and more welcoming approach. At the National Association of Plan Advisors, John Sullivan shares this commonsense perspective on plan communications from Keith Mayfield, Co-Founder of my Account:
Here’s an often-overlooked truth: every employee is already a participant in a retirement plan….Whether they think about it or not, whether they are active in it or not, every person is continuously participating in the one plan that matters to them: Their personal retirement journey…. Each year, they get older. One year closer to retirement. One less year to save. Every paycheck beginning with their first job is a deferral decision. Their actions — or inactions — become their plan. That’s their reality, and that’s our responsibility….
Ditch the language of optionality, such as “Do you want to join?” and “Enroll now.” Instead, start with “Welcome — you’re already a participant in our plan; now, let’s personalize your deferral amount from 0% and up.” This shift improves the perception of the employer benefit culture, removes pointless friction, and fosters ongoing employee engagement.
By taking a “100% welcome” approach, and eliminating the very concept of “non-participants,” employer sponsored retirement plans can send a whole new message about saving opportunities from the get-go: we’re all in it together, no matter what individual choices and adjustments we make at different moments in time. Pointing out that “changing the mental framing for plan sponsors and employees” can make a tremendous difference, leadership at my Account offer these additional pointers for improving plan communications:
- Every eligible employee is a plan participant and a participant in their own ongoing personal retirement journey. Every plan document defines “participant” as one who has met eligibility and entry criteria, regardless of deferring 0% or higher, so don’t artificially create challenges to success by using “opt out of being a participant” or “become a non-participant” language. A 0% deferral is a valid participant choice — not an opt-out or non-participant.
- Since eligibility and entry criteria automatically trigger participant status, every plan is technically “auto-enrollment,” even those with a default deferral rate of 0% … .Upon meeting eligibility and entry requirements, all your employees are automatically included as plan participants. …. Remember, all a new participant must do is personalize that deferral, a simple, one-time salary deferral decision.
Communicating Responsibly
Keep in mind that the best retirement plan communications are also tailored for the participants. Age, gender, race and ethnicity play a big role in our chances for retirement success, so all participants need to feel that online and print communications are addressing them, personally. Imagery is of course important and research has found that the preferred communications of participants highlight:
- Diversity of race and ethnicity as well as life stage and work setting, including retired singles, younger people and those working non-traditional jobs
- Portraits of retirement as a physically active time with a broader depiction of retirement activities
- Images of technology. Universally, respondents liked seeing the technology they use in their daily lives, such as tablets and smartphones
- People actively working in retirement as retirees are increasingly choosing (or needing) to pursue part-time work in retirement
Most plan sponsors outsource plan services, including communications, to expert third party providers. Nonetheless, the choice of providers, and the supervision of the information received by participants remain fiduciary duties of the plan sponsor. As such, plan sponsors must be up to speed on best practices for keeping all participants engaged and informed:
Fiduciaries must educate their participants about the plan and investments. Written notices will suffice but are a bare minimum and traditional education is not that successful, so thoughtful and creative approaches to education are desirable. “The more engaged the plan sponsor, the more engaged the participant and the greater likelihood of improving participant outcomes….It’s incredibly important that we lean into this idea of engagement.”
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