Retirement plan service providers have been investing in online tools and content to keep plan participants more engaged, informed and active in managing their paths to retirement. Recent research illustrates how digital experiences are increasing participant engagement in 401k plans.
Email, Calculators, Chatbots…
In 2020, only 9% of 401k plan participants preferred receiving their account information via email. Now, 25% of plan participants indicate a preference for email. Research from Cerulli Associates also indicates that tools and calculators offered on provider websites are rising in popularity, with 86% of participants saying they are “very or somewhat helpful” (up from 77% in 2020), while interest in digital content is up a solid 20%. As Investment News reports:
Record keepers and third-party providers have worked to improve digital experiences to better connect with people under the age of 30, who are more likely to rely on a provider’s website, mobile apps and text messaging to review 401(k) account information, Cerulli found. Some firms have adopted “journey-based” website designs that guide participants through certain online procedures, such as enrolling in a plan or making an investment selection.Firms are also continuing to expand and improve their presence on social media, according to David Kennedy, a senior analyst at Cerulli.
“Generation Z exhibits a greater preference for digital communications and social media from their provider compared to participants overall,” Kennedy said in a statement. “Building a positive and encouraging experience with a record keeper at this early stage in Gen Z participants’ financial lives may make them more likely to continue an investment relationship in future decades.”
In addition to the “generic” information and tools plan providers are providing via websites, emails and chatbots, they are also increasingly able to tailor information and tools to better engage different market segments in saving for retirement. Investment News shares that algorithms are in use to “determine who’s most likely to benefit from certain recommendations” and email blasts can send a “behavioral nudge” to specific target groups too: “For example, firms can send content about the benefits of saving early to younger participants, while older clients receive information about transitioning to spending assets in retirement.” Sharing personal information, such as savings held outside of the retirement plan remains an area of reticence for plan participants. Though sharing this information could help plan providers offer more comprehensive retirement planning, Cerulli’s research finds that 31% of participants remain uncomfortable with sharing nonretirement savings balances.
Protecting Personal Information
As more retirement plan participants become comfortable with and engaged in using digital tools to advance financial literacy and retirement planning, more attention also needs to be paid to cybersecurity. Experts remind plan sponsors to not only address cybersecurity when choosing a service provider, but also to “add a cybersecurity review to their annual work plan, like they do with investment reviews.” Essentially, it’s critical for plan sponsors to focus on cybersecurity at these three levels: the choice of service providers; the plan sponsor’s internal policies; and, the communications about cybersecurity for participants. Recommended questions to ask third party service providers include: “What has the provider’s record been? Has it experienced any breaches? What is its plan in case of a breach? How would a breach be reported? And what technical certifications do staff members have in cybersecurity?”
Of course no matter how diligently retirement plan fiduciaries work to address cybersecurity, they can never fully eliminate the possibility of a breach. Similarly, plan sponsors can never fully eliminate the risk of being held personally liable for fiduciary breaches. Under the high standards of ERISA law, even a relatively small cyber incident can rapidly spiral into allegations of a fiduciary breach. Why take unnecessary risks? Colonial’s ERISA Protection Package includes both Fiduciary and Cyber Liability Insurance—providing:
- Legal defense and coverage for penalties against claims of alleged or actual breaches of fiduciary duties.
- Defense against lawsuits and regulatory actions related to a cyber breach.
- Expert-led response, notification and crisis management services to prevent a cyber incident from spiraling into a disaster.
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Response Plan?
Among the DOL’s recommended best practices for mitigating cybersecurity risk is having a cyber breach response plan that prevents incidents from spiraling into disasters. Colonial Surety makes it easy and affordable for even small businesses to put a cyber response plan in place—immediately. In fact, an extensive cyber response plan is included in Colonial’s Cyber-Fiduciary Liability package, providing:
- Expert-led response services following a data breach.
- Protection from lawsuits and regulatory actions related to the breach.
- Legal services.
- Computer forensic services.
- Public relations and crisis management expenses.
- Notification services.
- Call Center services.
- Credit and Identity monitoring
Colonial’s Cyber-Fiduciary Package, also covers defense costs and penalty limits up to $1,000,000, if faced with claims of alleged or actual breaches of duty in connection with the employee retirement plan. At Colonial, we make it so efficient and reasonable for plan sponsors to secure insurance, that you can do it in minutes, now:
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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. We help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time.