A targeted approach is the most effective communications strategy an employer can implement to help employees understand their retirement plans. Milliman’s Denise Foster and Genny Sedgwick offer perspective on the benefits such a tailored communications approach can have on plan participants in this Business Insurance article (subscription required).
Here is an excerpt:
Most American workers aren’t saving enough toward retirement because they are struggling financially — often living paycheck to paycheck — and do not have the discretionary cash needed to build a retirement nest egg, experts say.
A good retirement communications and education program recognizes this and offers plan members help with such financial fundamentals as budgeting and saving.
The most effective way to communicate these lessons is with a targeted approach that takes into consideration plan members’ ages and other demographic characteristics. The messaging also should be continuous, occurring throughout the year, experts advise.
…“One of the best approaches is a real targeted one,” said Denise Foster, a principal and communications consultant at Milliman Inc. in Seattle. “It’s a lot about tailoring the message to the particular employee group…”
“In financial services, we use a lot of terms that don’t resonate with participants, and they shut down and stop learning,” said Genny Sedgwick, a principal and practice leader for defined contribution plan record-keeping at Milliman Inc. in Seattle. “People feel like they need to be the expert, and they realize they’re not. At the end of the day, participants just want you to guide them.”
To learn more about effective employer-to-employee communication strategies, read this article by Denise Foster, Sharon Stocker, and Heidi tenBroek.
Denise Foster, Sharon Stocker, and Heidi tenBroek highlight circumstances when their employer-to-employee communication strategies can help prevent misunderstandings.
Here is an excerpt from their article on effective employee communication:
Communicating difficult or sensitive changes
Clients often seek out the experience and expertise of Milliman’s growing communication consulting team when they are making difficult decisions that result in a negative impact (for example, benefits reduction) or that present additional challenges for employees (such as a new tool or system). We help employers explain why they are making changes—without obscuring the truth.
Sharing good news
Effective communication matters even when an employer is improving its benefits package. One client—without our help—introduced an improvement to their benefits plan. Years later, many employees still think negatively about the change because the communication wasn’t clear. Good communication is especially important when there’s a lack of trust—in such an environment, employees are more likely to create their own version of what happened.
When “nothing changes”
Sometimes a client will change medical carriers and the employer wants to say they are not changing the benefits. But different carriers administer plans differently with real-world consequences for employees. We know the questions to ask and can help employers figure out all the smaller but important changes that may affect their employees, or, if those details are unknown, advise them on how to best communicate with employees that there may be some differences between the two plans.
In addition, what may seem like a minor change to an employer can be perceived as a major change by the employee. For instance, when you’re converting a vacation/sick leave program to a PTO program, it’s important to communicate all transition details. Is it clear what’s happening with the sick bank an employee has saved up? In such a situation, it’s best to create a personalized piece: Here’s what you have and where it goes.
To read the entire article, click here.
Communicating is key to the success of any business. This new article by Milliman consultants Denise Foster, Sharon Stocker, and Heidi tenBroek offers employers strategies for sharing important information with employees.
This excerpt outlines five best practices:
1. Plan before you launch. Before you get started, define objectives, identify key stakeholders, and create a strategy and plan of action.
2. Don’t sugarcoat bad news. Employees see through and resent attempts at hiding benefit changes that can be perceived negatively.
3. Stick to your message. Determine key messages at the beginning and communicate them consistently.
4. Make sure the managers and supervisors are on board. This is an underestimated group—they have influence over employees and can be advocates or barriers depending on how you treat them.
5. Rinse and repeat. Reinforce key messages multiple times and across a variety of media in a coordinated way to avoid overwhelming the intended audience. People are affected differently by different formats and messages need time to sink in.
Individuals who don’t save for retirement can be divided into three groups: those who don’t know they should, those who are unwilling (they know they should but don’t), and those who don’t have the means (they know they should but can’t). A plan sponsor likely has all three of these groups within its organization; each presents some unique challenges, but the first two groups would clearly benefit from an effective financial literacy program.
It’s a simple and sad fact that some people don’t understand how important it is to save for their futures—these are the truly financially uninformed. Perhaps they were never exposed to the concept of saving; or their parents didn’t save or emphasize its importance. Where else would they pick this up? In North America, it’s rarely taught in school. Lacking knowledge and awareness, they live in the moment and are surprised to find they’re unprepared for the future.
More puzzling is the group of individuals who don’t save for retirement when, at a basic level, they know they should. Why would someone saving hard for retirement take an ill-advised loan from the account to pay for a new truck? Perhaps the following starts to explain some of this seemingly irrational behavior.
- The concept of a comfortable retirement is too nebulous and distant to motivate people to save. Instant gratification is the name of the game. Why wait when you can have it now?
- Denial dominates the thinking. If subsisting on Social Security or a meager public pension is the consequence, it doesn’t seem real for individuals as they continue to enjoy a prosperous and bountiful lifestyle.
- Information overload can lead to inaction. An overabundance of information can make it hard to filter out what’s important. People can reach the point of saturation and simply become paralyzed.
- Choice costs time. When faced with too many choices, it can be overwhelming to wade through them. The more choice, the more effort—and people will often choose the path of least resistance, which is to do nothing at all.
Critical needs can compete for resources. When a person is struggling to put food on the table every day, how is it possible to set money aside for the future? Sadly, given the economic downturn, more and more people are in this situation across the globe.
On May 16, 2011, the Supreme Court affirmed unanimously that the Summary Plan Description (SPD) can not be used to support claims of participant plaintiffs when suing for harm due to a misleading SPD (Cigna vs. Amara). The only presiding document is the official plan document. If you follow the legislative world closely, this is a big deal.
But is it really? Every SPD I have ever written has included the warning: “In the case of a discrepancy between the SPD and the plan documents, the plan documents prevail.” It’s always been about the plan documents “governing.”
So will this ruling change anything? I would argue no. Companies will continue to write SPDs and worry about their accuracy for the same reason they always have—not just because it’s required but because it makes good sense. It’s sometimes the employees’ best chance at understanding their benefits. It translates the ever-accurate legalese into something my mother can understand. Well-written SPDs make a reader say, “Oh, NOW I get it,” which is finally the point when they see that the benefit is worth something. You don’t value what you don’t understand. The ultimate goal will always be what it has been for most responsible companies, making sure employees understand the benefits their companies invest in so deeply.
We’ll see if the ruling really does affect how companies approach SPDs.
In any case, plan sponsors can make the most of their benefit dollar by writing SPDs and writing them well; it matters to employees and family members.
Recently I wrote in this blog about educating Generation Y and X women on retirement and I suggested that the Department of Labor create an app to go along with its Wi$e Up financial literacy website for young women. After further digging, I came across a a few iPhone apps (titled Women, Wealth and Wisdom) that help young women envision their retirement and start planning today. So I thought I’d give one of them a test drive.
The app is Women, Wealth and Wisdom Retirement Income Calculator created by AXA Equitable Financial Services back in 2009 as part of a suite of financial apps for women. The app does what it’s supposed to do, nothing more and nothing less. Users can type in some basic information about their retirement savings and the calculator spits back some estimated answers to questions like “How much money will I have to spend each month of my retirement?” Users can adjust things like rate of return and years of retirement.
Although not particularly specific to women, I found this app to be functional and generally helpful in answering the basic questions. There was one minor oddity, though. The default answer for the “current age” section of the form is 60. Yikes! I thought we were trying to get women to start planning for retirement early? Still, unlike your real retirement numbers, the defaults in this app can be easily changed.
The April issue of Benefits Magazine (subscription required) has an interesting article, “I Know I Could Save More, But….” For those without easy access to the article, which reports the results of a survey ING did with 1,000 workers participating in employee-sponsored 401(k) plans, here are a few highlights:
- “Of those participants who were not contributing the maximum … nearly nine in ten (87%) admitted that they could afford to increase their annual contribution by 1% of their salary. In fact, 59% of them confessed that they could boost their contribution by 3% of salary.” Employees saw “saving for retirement as a ‘choice’ that is less compelling—or far less urgent—than other ways to spend their money.”
- “Nearly two-thirds (64%) of those surveyed by ING said that their company plans account for all or most of their retirement portfolios. Nearly half of the plan participants polled (44%) said that if they didn’t have a retirement plan at work, they probably wouldn’t be saving for retirement at all.”
- “About 77% of respondents with kids at home said that their child is more likely to catch a foul ball in the seats at a baseball game than to cash a Social Security check.”
- “Nearly two-thirds (65%) determined their contribution rate themselves [without consulting tools or experts], and one in five (21%) admitted that they ‘go by gut feeling.'”
- “More than half (52%) of survey respondents said their employer plan was the main place they learned about investing. Those polled cited their employers as having the most influence in getting them to start saving for retirement, followed by family and friends.”
- “Over half (55%) agreed that if their employer provided them with more detailed education, they might contribute more to their plan. And better than seven in ten (72%) wished their company customized information for their personal situation.”
What does this mean for employers?
- Keep communicating the importance of saving for retirement. It matters.
- With perceptions of Social Security as less than stable, and many employees with no other savings vehicle, what you do will affect employees’ retirement.
- Help employees estimate how much they’ll need to save. Just the act of estimating helps them change behaviors when it comes to saving for retirement.
- Encourage employees to save. Keep reminding them. You may be the only credible source for this important information.
- Communicate, communicate, communicate. Give employees tools and resources. Even if you have them, employees may not remember. Remind them how the tools work and what value the resources will provide.
- Personalize the communication. Answer the questions: “What’s my situation?” and “What action could I take to improve it?”
This frightens me. In a recent survey, only 10% of working women surveyed felt confident that they had enough saved to live comfortably in their retirement. True, the downturn of the economy has created uncertainty for everyone—those who are working (and the millions who are not). But before you blame the economy, in 2008 women’s confidence level was just 14%. Good or bad economy, this is an unbelievably low number, and it echoes a confidence crisis we’ve blogged about before.
Women are more likely to live longer (and as a result have higher healthcare expenses during their retirement years), not have a pension, and sorely underestimate how much they’ll need in retirement. Women are more likely than men to think they’ll be reliant on Social Security but then women are more likely to believe the value of this benefit as it’s provided to retirees today won’t be available to them. Can we fix this problem in the next generation? How can we educate our youth and, in particular, the young women of this country? In doing research on this topic, I came across a website targeting the Generation Y and X women, managed by the U.S. Department of Labor (DOL). It’s a start. Readers may also be interested in this special feature from the Wall Street Journal.
Hey, DOL! There’s a surefire way to get the attention of young minds these days … create an app for that!
People are more likely to save for retirement if they can see themselves…aged. Strange but once again proof that emotional connections help foster behavior changes.
Pension plans may be one of the best kept secrets of employers. It’s not a surprise when you think about it. Employees don’t interact with this benefit much during their careers. For years, employers have given pension plan information to new hires via an orientation packet, which has typically been a ream of paper containing an overwhelming amount of information.
While small changes may have been made, the changes themselves usually haven’t resulted in a significant communication campaign and so employers are silent … and employees are unaware. If employees know they have this benefit, in most cases they don’t understand the value or how it works. What kind of benefit is this?
For many years, I’ve seen clients spend significant money (certainly more lately) to maintain a healthy pension plan and spend little to nothing to see that people understand and appreciate the effort. Go figure.
Effective pension plan communication can start with something as simple as providing a better explanation with required notices. If participants don’t understand the information, in this economy particularly, they will imagine the worst. If it isn’t good news, employers should be straight with their employees about what’s happening, and why and how they’re affected. If you have a pension plan weathering the storm, explain how the benefit works, define unfamiliar terms, share an example, and demonstrate the value. Show how the pension plan fits into the overall benefit strategy by providing a total compensation or total reward statement. Just don’t keep one of your most valuable benefits a secret!