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Best Behavioral Practices for Save More Tomorrow Ira Finn April 23, 2013 Agenda • • • • • • Disclosure statement Background Gospel according to Ira What has not worked What has worked Case study 2 Discloser • I am speaking for myself and not my company • Nothing I say should be interpreted as advice Background • Manage DC, DB, Active and Retiree Health Care • Current Employer – 12,000 employees – 5,000 part-time employees – Range of education and experience – 20% turnover rate • Previous 401(k) campaigns – Increasing deferrals – Diversifying assets – Stay the course during tough times 4 Gospel #1- Compliance, compliance, compliance • Compliance – Have you read your plan document? – Actions speak loader than words • Does your plan operate in the same manner as what is outlined in your plan document? 5 Gospel #2: Now that you understand the plan… – Your SPD needs to speak in the same language as your employees • If not, does your line operator have a legal degree? – Cut the jargon – Make it readable – Annual compliance notices are a perfect time to publicize the plan Gospel #3: You didn’t think you were done • More bang for your buck $$$$$ – Compliance notices go out with an informational cover letter • • • • • My 11 year-old (5th grader) must understand the communication Communication is focused on one issue Take out more than 100 words on a page Fill with appealing picture to grab attention Play the game ‘Connect the Dots’ when it comes to disclosures What has not worked • Click…Click…Click…Click…Click – How many clicks does it take to “take action”? – How many logins do you need to get to destination? • Do the plan sponsors understand provider system better than the provider? • Stuffing the envelope – New hires do not need a 25 page welcome letter – Provide information on how to get more information • Commingled communication – Communication campaign to increase participation does not need to be a college course in asset allocation What has not worked: I never learned this in college What works- Men do not like to ask for directions • Paper Communication- Website and Phone Number First • Electronic Communication- Link to website first • RFP – Web demo- Invite administrative assistant for his/her reaction – Phone demo- Put provider on the spot and have them call the 800 number and see how easy it is to speak to representative • Do not bury information – Anyone get enjoyment from reading a 100 page prospectus? What works: K.I.S.S. – Single targeted communication • Example: Beneficiary elections – Dire Straits Model: Money for Nothing • Generation X and Y love when you give them free money – Everyone loves an incentive • iPad motivation works – Make it esthetically pleasing • Baby boomers can relate to an image of a ‘63 Corvette Coup • Savings growth if you contributed March Madness money into 401k plan • Fill your Christmas stocking with the gift of retirement Case Study 1: Participant Education • Manufacturing company with Pension, 401(k) and Hybrid Plan • Does not have auto enrollment feature – Participation Campaign (over a 2 month period) • 3 direct mailings to employees home • Mandatory employee meeting with onsite enrollment opportunity • Competition between locations for largest participation rate – Results • Increase in participation from 58% to 75% • Increase in participation 50% amongst Hispanic employees • Contributions increased from 4.9% to 5.6% – 2nd Campaign 4 months later on investment education and diversification Case Study 2: Behavioral Validation • December 2012 – Company with auto enrollment 3% and auto escalation (max 6%) – Announced reduction in force – Announced company match would be cut in half – Participation rate was 78% – Average deferral was 5.3% • April 2013 – New discretionary match tied to company results – 9% drop in eligible participants – 8% drop in plan participants – Participation 77% – Average deferral 5.4% Any Questions? Ira Finn [email protected] www.benefitsofhr.com THANK YOU!