For Employees to Benefit, Plan Sponsors Need to Get the Word Out

Research shows that corporations have to do a better job of informing employees of how to take advantage of financial planning opportunities.

Companies must dramatically change their approach to engaging with employees about retirement plans. Without substantial change, we could see a generation or more of employees approaching retirement unaware of the shortfalls on the horizon.

According to surveys we at Corporate Insight have conducted, plan participants are less than fluent in the specifics of their retirement plans, and plan sponsors lack the resources to implement change.

Only 43 percent of employers offering megaplans, defined as having at least $1 billion in assets, have a dedicated budget for participant communications and education; for companies with smaller plans, the number is only 16 percent. Of those with a communications budget, 42 percent and 88 percent, respectively, have set aside less than $100,000 to get the word out. Especially in large corporations, that doesn’t go very far.

There is a light, albeit a small one, at the end of this particular tunnel. Nineteen percent and 38 percent of plan sponsors, respectively, anticipate larger communication budgets in 2016, which should result in more information sharing and, therefore, more knowledgeable participants.

Budgets notwithstanding, employers of all sizes seem to agree on the effectiveness of various modes of communication. One quarter of all megaplan employers believe that in-person adviser meetings are the most effective way to communicate with participants; nearly an equal proportion prefer e-mail. Among smaller plans, 28 percent believe that in-person adviser meetings are most effective. This is not terribly surprising. Although adviser engagement is important, it must be supplemented with strong resources and tools that allow participants to gauge their retirement readiness outside of their requisite face time with an adviser.

Another troubling trend identified in our research is a lack of dialogue between sponsors and participants over retirement readiness. Some 79 percent of megaplan sponsors and 55 percent of other sponsors do not bring up financial preparedness, be it at new hire orientation, annual review or otherwise. This represents a major missed opportunity on the part of the sponsor. Being mindful of the suitability standard is important. At the same time, plan sponsors should also keep fiduciary duties in mind.


Such employer outreach does not necessarily encompass retirement coaching, but sponsors should be motivated to provide participants with the information needed to make responsible decisions with regard to their defined contribution plans. This aspect becomes even more important when we consider that only 8 percent of plans arrange for meetings between retired employees and advisers. What this tells us is that not only are participants left to their own devices to learn the nuances of retirement wellness, but they also receive no assistance after retirement. Shouldn’t all involved want plan participants to be as knowledgeable as possible? After all, retirement spans a fairly large — and inevitably increasing — number of years, within which participants must manage their portfolios and budget by using whatever skills they picked up through their retirement plans along the way.

These statistics are alarming. Fortunately, there is a growing number of plan sponsors that understand the creativity and flexibility necessary to solve today’s problems. One plan sponsor responded to a question in our survey by stating that sponsors must “find a way for employees to determine how much they will need in retirement and how much to save to get to that number,” indicating a desire to partner with and better understand participant needs. Another sponsor stated that employers should “have an on-site retirement planning workshop for employees aged 60 or older.”

Although the current system can benefit those who plan, it is not adequate for creating a retirement-ready workforce. Our surveys indicate an industry in need of help — namely, a closer partnership between participants, providers and plan sponsors. Sponsors should strive to arm themselves with information regarding participant education and communication so they can develop a best-in-class participant experience — and have fully prepared employees as a result.

Drew Maresca is director of WorkPlace Exchange, a research service of financial services consulting firm Corporate Insight, in New York.

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