PLANSPONSOR - April - May 2022 - 30

PLAN DESIGN | BEHAVIORAL FINANCE
Strategies to Boost Engagement
EVER since economists Richard Thaler and Shlomo Benartzi introduced
the idea of " nudges " to retirement saving-going on to win the Nobel
Prize for their research in 2017-plan sponsors have been looking at
ways to use behavioral finance strategies to increase participant
engagement. Some of those strategies, such as automatic enrollment and
automatic escalation, have proven popular and successful. Here are 10
other research-backed approaches to amplify participant engagement:
1) Offer a Fresh Start
Researchers at Harvard sent university employees
mailings encouraging them to immediately increase
their saving rate or to do so sometime in the future.
Framing the future date as a " new opportunity "
connected to an event such as the first day of spring
increased the likelihood that they chose that option.
2) Build 'Bridges'
A recent paper from the Center for Retirement
Research at Boston College examined introducing
an annuity to plan participants as a " bridge " that
would allow them to postpone claiming Social
Security and thereby increase the value of future
Social Security payments.
3) Make Cents
In a study by Voya, researchers told one group of
participants that, when they saved, to think about
saving seven pennies of every dollar they earned
and another group to think about saving 7% of their
earnings. The former group, particularly the lowerincome
participants, had the higher saving rate.
4) Think About Digital Design
According to a paper appearing on the SSRN, when
researchers made several small changes to an enrollment
platform, including using multiple colors for
the enrollment button, displaying the plan's default
rate on the enrollment screen and simplifying the
language used, personalized saving rates increased.
5) Use Peer Pressure
The U.S. Army emailed service members who were not
contributing to their retirement plan, saying, " Service
members like you start by contributing at least [an
average 4.5%] of their basic pay into a traditional or
Roth TSP [thrift savings plan] account, " says the TIAA
Institute. The result? A 7.6% increase in participation.
6) Order With Intention
A study in Financial Review found that participants
had alphabeticity bias-when funds appeared in
alphabetical order, participants were more likely to
select those at the top of the list. Researchers suggested
that sponsors and recordkeepers consider other
approaches to ordering, such as by expense ratio.
7) Provide Instant Gratification
Researchers with the Aspen Institute found that
providing a $10 Amazon gift card for visiting the
enrollment portal prompted 7% of employees to
increase their contribution, while offering information
about the long-term benefits of the increased contribution
had no effect.
8) Get Granular
In a study, published in Marketing Science, of
freelancers using a financial app, to frame participation
in terms of daily rather than monthly amounts
quadrupled the number of consumers who enrolled in
the savings program and eliminated the participation
gap between high- and low-income savers.
9) Don't Be Too Positive
When unengaged participants received a communication
alerting them to how far off they were from their
retirement goals, they were more likely to engage with
the plan than were those who got a communication
on their progress, according to a study by the Defined
Contribution Institutional Investment Association.
10) Host a Wellness Webinar
A study by the Employee Benefit Research Institute
found that by attending any financial wellness
webinar, plan participants increased their 401(k)
contribution by between an estimated $649 and
$988, depending on the participant's age and initial
contribution level. -BB
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PLANSPONSOR - April - May 2022

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