PLANSPONSOR - August - September 2022 - 31

PROVIDER RELATIONSHIPS | OPEN ENROLLMENT
enrollment choices.
" An advantage of
adding the 401(k) to open enrollment is
that it's helping someone have a wholepaycheck
view of what their benefits
expense will be in the next year, " says
Donna Westervelt, a principal in Buck,
a human resources consulting firm, in
New York City. " This year especially,
because of inflation, employees' decisions
about their benefits will just naturally
face much more scrutiny. "
Logistical Choices
On the whole, employers do not integrate
the 401(k) into open enrollment technologically,
Hauch says. " Most of the time,
the health and welfare benefits administrator
that is recordkeeper for employees'
health-benefits decisions is different than
the 401(k) recordkeeper, so it wouldn't
be that easy to integrate beyond an SSO
[single sign-on] link, " she says.
Amy Reynolds, a partner in consultant
Mercer, in Richmond, Virginia,
concurs. Think about the technology
integration in terms of who " owns " the
mechanics of implementing an election,
she suggests. For a 401(k) plan,
this is generally the plan recordkeeper;
for health insurance annual elections, it
is likely the health and welfare administrator.
" There's an exchange of information
required there that typically doesn't
happen, " she says of technologically
combining the two for open enrollment.
" So, often there is a reference to
the retirement plan in the open-enrollment
form, " Reynolds continues. There
can be a single sign-on for an employee
between the health and welfare benefits
administrator handling the open enrollment
and the recordkeeper's participant
site, so an employee who wants to enroll
or change deferral rate can click on one
button in the open-enrollment form
and go directly to the recordkeeper's site
to make changes. " That's probably the
cleanest way to do it, " she says.
Employers also have to work out
whether their open-enrollment form will
simply either enable employees to join
the plan-if they are not participants
already-or adjust their deferral; or will it
demand that they act? " You can make it
a required election decision, but that's an
unusual stance for an employer to take, "
Reynolds says.
Communication Keys
Sources offered these tips for how to
effectively communicate with employees
about your plan to include the 401(k) in
open enrollment:
" You can make
it a required
election decision,
but that's an
unusual stance
for an employer
to take. "
* Limit the elections. Austin advises
offering just the options to enroll and
to make a deferral change, rather than
including all plan decisions such as
investment choices. When it comes to
communications, " our golden rule No.
1 is to make it personal, and our golden
rule No. 2 is to make it simple, " he says.
So, for example, the option to enroll can
be expressed in three choices-whether
or not to enroll: 1) at the automatic enrollment
default deferral rate; 2) into the
plan's default investment; and 3) into
automatic escalation. " You don't want to
have too many decision points, " he says.
* Present the choices simply. " Don't
put everything in a 4-point font and fill
up the screen, " Austin advises. " Use as
few words as possible: Present the information
in bite-sized pieces. And make it
possible for people to take action without
too many friction points. It's an issue of
putting in buttons that people can click on
to execute their decisions easily. "
* Anticipate common questions.
If this is the first time an employer is
adding its 401(k) to open enrollment,
it may choose to tell its employees why,
Westervelt says. Also, " The employer will
want to make clear when the enrollment
or a deferral change will take effect: at the
time of open enrollment in October, or
January 1 of the next year? The employer
may choose to ensure that the decisionsupport
tools it offers employees [at this
time] also include the 401(k). " This helps
employees have a holistic sense of their
potential benefits expenses for the next
year, and the trade-offs, as they consider
the possibilities.
* Mitigate the risk of deferral
decreases.
" There's a risk that some
employees will decrease their deferral
rate, if it's included in open enrollment, "
Westervelt observes. Employers
can do things to try to mitigate that risk,
including promoting other financial wellbeing
programs offered such as financial
coaching that help employees with
their cash-flow management. Also, she
suggests making it clear that, unlike
health insurance elections, which generally
are annual and unchangeable during
the year, 401(k) participation and deferralrate
choices may be remade at any time.
Hauch recommends putting the
temptation to make deferral changes into
context. WTW's 2022 Global Benefits
Attitudes Survey, which incorporates
feedback from employees at more than
500 client organizations, points to the
increasing emphasis people place on their
need to feel more security about their lives,
including their retirement. For instance,
35% said they are saving less than 5% a
year for retirement and want to save more.
" The whole notion of security is
something we're seeing a lot in employees'
priorities, " Hauch says. " Much of the
messaging, including for the 401(k),
needs to be about security for today and
for tomorrow. The message is, don't make
changes now, such as a deferral decrease,
that could affect your long-term financial
security. " -Judy Ward
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