In the movie Good Will Hunting, the character portrayed by Robin Williams helps the troubled Matt Damon start to let go of his past by getting in his face and saying “It’s Not Your Fault” over and over again. (Watch here – profanity warning!) My message to many employers that have tried, with limited results, to help their employees participate in their retirement plan and prepare for their future is: “It’s Not Your Fault!” Do you feel better? Now before you go any further, take a moment to embrace your nearest coworker and let it all out (send them this blog first, though, otherwise it could be awkward).
One of the words that comes up often in forums and presentations and reports on employee participation in employer based retirement plans is apathy. Most employers struggle with getting their employees engaged in the process of planning for their future.
We have been working directly with employees for 20 years and have learned that, in many cases, there is just nothing you can do for some of your staff. Some people simply do not take an interest in either participating in your plan or in preparing for their future. There could be many reasons why and some of it is just not your business. There might be some variation from employer to employer on this issue, but it is a common problem.
However, if you are seriously interested in helping your staff get the most out of your plan, are doing all you can? Here are suggestions that we believe you should consider to provide your employees some guidance or assistance in helping them become better prepared for their future:
AUTO ENROLLMENT AND AUTO ESCALATION
Auto enrollment should be standard in all employers. These means that all staff is enrolled automatically unless they opt out. Pick an amount anywhere from 3% to 10% (really, 10%) that all employees will contribute upon eligibility. Employees can opt out if they like. Also, if you really want to increase enrollment, force employees to opt out each year. Auto escalation is another excellent way to help your employees. This provides each employee the option to choose to automatically increase their contribution periodically, like once a year. Is there any reason not to offer this?
GUIDANCE AT ENROLLMENT
Provide personal assistance from a human that will help each employee enroll, determine the amount to contribute, and explain the investments. An experienced professional should help employees navigate through this process and frame how the plan will work for them today and in the future. By the way, don’t make assistance mandatory. Some of your employees may decline the assistance if they are comfortable doing it on their own. Also, make sure that whomever is providing this advice, though, does not try to sell your employees other products during this interaction.
Some of your employees may want an opportunity to look at the bigger picture. How do they balance saving for retirement with their current needs? What should they prioritize, saving or paying off debt? Should they develop a budget? When can they realistically expect to retire? These questions, and others, can be addressed by completing a retirement or financial plan. Many people struggle to plan or don’t know where to turn for help. Providing your employees an opportunity to assess where they stand for the future can significantly enhance the value to your retirement plan. We would also caution you against turning this into an opportunity for an adviser or broker/dealer to sell investment products.
Offering your employees opportunities to learn more in an educational format can be somewhat helpful. These are not as effective as one on one encounters, but can be good supplements. Generally speaking, webinars are better than seminars but both can work. Use topics that can build off of prior sessions. Try and keep them brief – maybe 25 to 35 minutes – and focused to one or two concepts at a maximum. Also, be sure to review the content of these sessions prior to delivery. Make sure that they are designed for the rank and file – if you really want to help the employees – and not full of a bunch of industry lingo and jargon.
Bigger small companies (if that makes sense) can also set up an education committee that is specifically designed to help the employees. It can be a part of the Investment Committee or its own committee. The discussions will cover different ideas and strategies that would help the employees better engage and save more. It is critical that members include employees from the rank and file.
A SIMPLE MESSAGE – ONCE A YEAR
Send out a message to your staff, once a year, reminding them of the resources available from your organization and that you value helping them prepare for their future. Let them know that you are open to suggestions to improve the plan if they make sense and are reasonable. Make sure that this message stands alone – do not include it as part of another communication.
IF YOU ARE PROVIDING SOME OR ALL OF THESE, OR SOME OF YOUR OWN, THEN “It’s Not Your Fault”.
WHAT DO YOU THINK? WHAT HAVE YOU DONE? WHAT WOULD YOU LIKE TO TRY?