PLANSPONSOR - April - May 2022 - 31

PLAN DESIGN | BEHAVIORAL FINANCE
" I recommend doubling down on
pandemic-related good habits, such as
using the home gym or eating lunch at
home, saving on gas and buying fewer
work clothes, " she says.
Peer pressure may be able to help with
this, due to the " social-proof heuristic, "
Keller says, referring to people's tendency
to observe the behavior of others to help
them make decisions for their own
behavior. " Studies have found some
success in using social-proof heuristics to
nudge individuals to make healthier food
choices, " she adds.
For plan sponsors, tapping into this
heuristic might mean highlighting the
stories of plan participants who have
made positive changes and reaped the
benefits.
Engaging Differently
Besides
engaging more,
contributionwise,
with their plan than in the past,
participants also are engaging with it in
different ways. For example, they are more
open to using different platforms and capitalizing
on virtual education offerings.
Nearly 100% of education sessions
for Schwab clients took place online
during the pandemic, up from just 24%
in 2019. When 2020 and 2021 sessions
were offered, 41% of clients chose to
watch them prerecorded, on demand,
rather than attend them live.
" The trend toward online education
was happening, but the pandemic obviously
sped it up, " Voris says. " If you think
about large employers with locations
across the country,
they now also have
folks working fully remote, or working
hybrid, with some [going to] the office.
It's difficult to conduct in-person sessions
that are effective in that scenario. "
Voris says he expects that
virtual education will continue
to play an important role
in participant engagement
but
that
in-person
programming will make a
comeback as well.
" Our sweet spot is
finding that perfect balance between
digital and virtual and phone and
in-person, " he says. " Those things can
blend and bleed into one another. The
ideal participant experience should be
that [people] can interact through whatever
channel they want. "
Along with customizing the medium
that plan participants use, customizing the
content they consume can boost engagement
as well. In her research, Keller found
that participants who watched enrollment
videos featuring people similar to themselves
in terms of age, gender and/or
income were more apt to engage with
the plan than they had previously.
To improve outcomes, plan sponsors
should further tailor
plan design to meet
the needs of specific
demographic groups.
For instance, women,
compared with men, may
need to save a higher percentage of their
income to ensure their retirement security,
given their longer lifespan and lower
earnings, so employers might consider
prompting them to increase their contributions,
Keller suggests.
" Even if they're automatically
enrolled, you want to get past the 3% and
start talking about customized saving
tips for different employee characteristics, "
she says. " It's always about segmentation
and targeting and positioning.
Figure out which employees you need
to target to increase engagement, and
design customized positioning
meaningful to them. "
that's
Milestone Moments
Many plan sponsors were able to connect
with plan participants over the past
year because of the pandemic having
prompted those workers to take time to
re-evaluate their financial situation and
make any necessary changes. But there
are other times, too-times not during
a global crisis-when plan sponsors can
catch people going through moments of
financial introspection, Chen says.
Those moments may include a milestone
such as getting married, receiving a
promotion or having a child.
" You might send people emails that
often get ignored, " Chen says, " but when
they're thinking about their general
financial wellness, they're more likely
to engage and to think about increasing
their contributions, or whatever other
changes they may need to make in terms
of their financial security. "
Chen says this is why financial wellness
programs were able to gain
so much ground during the
pandemic, although the
data remains unclear as
to whether self-selection
into a financial wellness
program means participants
already had greater
interest in engaging with
their plan.
Still,
while
engagement
is an important goal, it is not the
only means by which plan sponsors can
improve plan outcomes, she says.
Focusing on Outcomes
" The primary focus is still to increase
plan balances and saving rates among
workers, " Chen says. " So, if there are
plan design features such as auto-enrollment
and automatic escalation that don't
increase engagement but do increase
plan balances and saving rates, employers
should still look at those. "
Plan engagement strategies, after all,
are ultimately a tool plan sponsors can
use to nudge participants to increase their
contributions and improve their retirement
security.
" If everyone is on track and has
enough saved up for retirement, it is fine
that participants are not really checking
on their account, " she says. " It could
potentially be harmful if participants
are constantly checking on their account
when markets are volatile, as it increases
the likelihood of panic reallocations
during temporary downturns. "
-Beth Braverman
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PLANSPONSOR - April - May 2022

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