Messaging Matters: 401k Participation



To increase 401k participation and savings, messaging has to focus on achievable goals and use the delivery channels savers at different ages are most likely to find relevant. Marketing experts share actionable strategies.



Both what messages say and how they are sent impacts the likelihood of participant response. Experts say it’s generally best to skip direct mail campaigns while working to increase engagement in the company sponsored retirement plan:


Nicole Montgomery, a professor at the University of Virginias McIntire School of Commerce, has found that not only is direct mail not effective, but participants dont like getting it. Older participants–Baby Boomers and Gen Xers—prefer getting plan communication in emails or via text message. Younger generations are also receptive to email and text messages, and they are also likely to use in-app communication.


How information is delivered is important if you want to increase the chances of someone reading it,” Montgomery says. The language needs to be easy to follow, and the communication itself needs to be relevant to the reader. The majority of communications in this context focus on what someone needs to do but dont give clear-cut reasons why someone should do something or achievements that could be possible if someone saves. People are more likely to put off the future if they dont feel a connection to it.”


When it comes to content, the best messaging propels participants into action by providing achievable action steps. Broad stroke swipes at the dire need to save for older age are unlikely to generate attention. Instead, offer specific, realistic stepping stones and digital tools that help illustrate the path. Here’s an example from Montgomery:


Telling someone that they need to save $1 million for retirement doesnt seem very achievable….If you are sending an email that says you need to save X amount this year to stay on track or X amount this quarter, people can think through how to achieve that. When they succeed, they feel good about it, which creates positive associations and makes them believe saving is possible for them.


Of course no one wants to lose—or end up the loser. Psychologist and behavioral economics professor Dan Ariely of Duke University says that this “natural aversion to loss” can be leveraged to encourage saving. As Ariely explains:


A company sends a notice to a participant and says we have allocated up to $500 as a match to your contribution.’ If someone puts in only $300, the company will send a second notice saying we have matched your $300 contribution and we are taking the remaining $200 back.’ This turned out to be very successful, because through the principle of loss aversion people are more motivated to guard against loss than they are to focus on gains.


Across the country, plan sponsors are working hard to engage participants in maximizing the benefits offered by the company sponsored retirement plan. While doing so, it’s important for plan sponsors to protect their savings too. Even with great diligence, mistakes happen and under the high standards of ERISA law, an error, oversight or misunderstanding can result in a costly fiduciary breach allegation for sponsors. The IRS  also reminds plan sponsors that selecting and monitoring individuals or companies to provide services, including communication and education, are fiduciary responsibilities associated with plan sponsorship. Colonial Surety makes it efficient and affordable for sponsors with plans of every size to secure a Fiduciary and Cyber Liability insurance Package that includes:


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Good To Know

Aging and retirement are touchy subjects, making it ever more important to get messaging right for everyone. Gender, race and ethnicity play a big role in our chances for retirement success, so efforts toward diversity, equity and inclusion should be reflected in retirement plan communications. Imagery is of course important and research from the Capital Group found that overall, plan participants preferred communications that 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


More engagement and participation in company sponsored retirement plans is possible—and Secure 2.0 provides small businesses with lots of incentives to help make it happen. As participation in plans grow, sponsors are reminded to be sure that the Department of Labor’s required ERISA Fidelity Bond, is current and adequately covers the plan. Colonial Surety’s here to help with multi-year options that make continuous compliance easy: ERISA Bond Package Here.


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Colonial Surety Company is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed and in business all across the country. Serving customers since 1930, we are the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. With a Trustscore of 4.8, we help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time.