What if there was a strategy you could employ with your plan sponsors and plan participants - a strategy that would benefit everyone, including you?
This strategic endeavor is centered around education, for the plan sponsor and for the plan participants as well.
A little background before we begin (brought to you by The Hartford): In an online survey of more than 1,000 participants between the ages of 18 and 64:
- Thirty-four percent said they have little or no understanding of the investment options available within their employer-sponsored retirement plan; and,
- Seventy-four percent admitted to some understanding of the investment options available to them.
Based upon these survey results and amplified by an estimate provided by the U.S. Census Department that contends there will be twice as many people age 65 or older by 2030, it would seem education of plan participants and plan sponsors should be paramount.
So, how best to provide our plan sponsors and plan participants with education? (It might be worth it to remind yourself and your plan sponsor that, under ERISA, you - and they are required to provide participants with sufficient education to enable them to make informed choices.)
Let's start with your plan sponsors. We have found that involving sponsors and plan providers through a series of meetings works well. In these meetings, the plan sponsor and their team - their legal and accountancy counsel are briefed on a variety of topics, from fiduciary responsibility to the advantages of instituting automatic enrollment.
(A recent study by Hewitt Associates showed that with automatic enrollment, employee participation increased to 90 percent.)
Let's continue with plan participants. We have found that periodic meetings with participant-employees throughout the course of a calendar year is most beneficial in providing education for them in terms of rebalancing (for example), as well as for us. We learn who has been promoted, and thus should be increasing their contributions, and who is contemplating retirement where we could render rollover assistance.
We have found that the traditional enrollment meeting can be improved. By inviting those soon to be eligible along with those who, while already eligible, elected not to enroll initially. And by involving the plan sponsor in the enrollment meetings where topics covered range from the minimal impact on the employee-participant's paycheck to the advantages inherent in rebalancing periodically.
Is there anything that can be done to drive home the immediacy of investing in retirement for both plan providers and plan participants? Well, you might try this.
Schedule a time where both the employer and the employees are in the same room. Provide them with pencil (or pen) and paper. Stress to them (again) how they need, right now, to list what they can and should be doing to prepare for retirement. As they begin writing down their retirement goals and objectives...turn out the lights and watch what happens.
Colin Smith can be reached via e-mail at rr1058@aol.com.
