PLANSPONSOR - August/September 2018 - 26

higher rate. Plan sponsors may legally do this but will need to keep
in mind that it could affect nondiscrimination testing. " New hires
ages 20 through 25 could auto-enroll at 3%; 25 through 30 could go
in at 5%, and 30 through 35 at 7%, as an example, " she says.
Auto-features are highly valued by the retirement industry,
but plan sponsors should not rely on them solely; sophisticated
or experienced participants may benefit more from other strategies,
Itzoe says. Considering that people may spend more time
thinking about who will start in a football lineup each week than
they do about retirement savings, at least an automatic program
gets people into the plan, he says. Otherwise, they might be at
zero savings. However, he notes, plan sponsors should still focus
on engagement-for new hires, and all participants-to raise
their level of success.
Engaging the New Hire
" In general with our plans, a new
hire is given the opportunity to make
an affirmative election for a deferral
percentage where he wants to be
invested, " Itzoe says. " We communicate
with the employee about the enrollment
process for the retirement plan
and the key dates that he can go into
the system and override the default,
or, that if he doesn't opt out or make
an election, he will be auto-enrolled.
This can be communicated by human
resources [HR]. " For the participants
with retirement plans from a prior job,
this is a very useful opportunity for
making decisions concerning their new
employer's plan.
Carrington acknowledges that
auto-enrollment is a great safety net but
and calculate the savings rate.
" This is a simple: one click, pick the number, " he stresses.
" It's easy for them to do it, it gets them back on the path they
were on at past jobs, and you're likely to see them act. Timing
the communication effectively and giving the participant a few
opportunities to act on it is ideal. Three weeks after they start
with the new firm, three months in, or January 1 can work well. "
Adding to the quick-enroll discussion, Elizabeth Heffernan,
" If people just
have typical job
tenures and pass
through plans and
auto-enroll and
auto-escalate, it
can cost them,
over the course of
their career, 1 to 2
percentage points
of savings ... "
believes that targeted communications with experienced hires
is a good way to go. This is an opportunity for plan sponsors to
enact the behavioral finance concept of " active choice, " he says.
Instead of a traditional opt-out scenario, plan sponsors can provide
a simple decision point where the participant must engage-and
thereby can avoid a potential drop in his savings rate.
" If I have a 35-year-old new hire, for instance, " he says, " I
would send him a targeted communication that in essence says,
'This is probably not your first job; you've probably saved before,
so here are three numbers. Which of these looks the most like
what you were saving at your last job?' And let the participant
choose to override the auto-default rate. "
Plan sponsors still have the safety net of getting the
employee into the plan, Carrington continues, but the person
gets a targeted opportunity-sometimes referred to as " quick
enroll " -to return to his previous saving level. " You want to
make it pretty simple and straightforward, " he says. " What you
don't want to do is ask the participant to dig up his old paycheck
26 PLANSPONSOR.com August-September 2018
managing director, business development, at Hueler Companies
in Boston, points to research done by Fidelity. " One of the interesting
things Fidelity found was that plan sponsors were sometimes
concerned about making those quick-enroll numberchoices
too high-such as 8%, 10% and 12%. But what we found
is that, whether you put 3%/5%/7% or 8%/10%/12%, the higher
amounts didn't necessarily dissuade
folks from enrolling at all or seeking
a lower amount. What ended up
happening was that people, no matter
what the choices were, tended to go for
the lower numbers. "
For many participants, emails
reminding them to log onto their
account, participate in training or
listen to provider webinars will not
move them to engage. But another
opportunity to catch their attention
is during the annual benefits enrollment.
Collinson says, " Even though
you don't have to re-enroll employees
into the retirement plan each year, it's
a great time to build in a retirement
planning component. "
This can be part of an education
campaign that encourages participants
to engage with the concept of
retirement, Collinson says. As participants age and amass
savings, whether in one plan or many, studies show they are
more apt to be interested in receiving tailored advice and recommendations.
" It's so critical that participants log onto the system,
estimate their savings needs, find out how much they should be
contributing to the plan, increase their contributions if they have
the available income to do so, and to personally check that the
asset allocation is consistent with their risk tolerance, their years
until retirement and their overall financial situation, " she says.
Carrington concurs. " It's really important to think about
what's going on in this world of more people being automatically
enrolled and escalated in more plans. Fewer of them ever make
an active decision, so we've got to find ways to engage them along
the journey. Simply auto-enrolling everyone at 3% and escalating
them to 6% is not enough. We can engage them with a safety
net, but we can't return to the bad old days of having them make
all the decisions. I think there's a spot in the middle where we
can engage them. " -Judy Faust Hartnett
http://www.plansponsordigital.com/plansponsor/august-september_2018/TrackLink.action?pageName=26&exitLink=http%3A%2F%2FPLANSPONSOR.com
PLANSPONSOR - August/September 2018

Table of Contents for the Digital Edition of PLANSPONSOR - August/September 2018
