Ira FinnApril 23, 2013

Best Behavioral Practices for Save More Tomorrow

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Agenda

• Disclosure statement• Background • Gospel according to Ira• What has not worked• What has worked• Case study

Discloser

• I am speaking for myself and not my company• Nothing I say should be interpreted as advice

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Background

• Manage DC, DB, Active and Retiree Health Care• Current Employer

– 12,000 employees– 5,000 part-time employees– Range of education and experience – 20% turnover rate

• Previous 401(k) campaigns– Increasing deferrals– Diversifying assets– Stay the course during tough times

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Gospel #1- Compliance, compliance, compliance

• Compliance– Have you read your plan document?– Actions speak loader than words • Does your plan operate in the same manner as what is

outlined in your plan document?

Gospel #2: Now that you understand the plan…

– Your SPD needs to speak in the same language as your employees• If not, does your line operator have a legal degree?

– Cut the jargon

–Make it readable

– Annual compliance notices are a perfect time to publicize the plan

PRE-TAXPROSPECTUS

DOLLAR COST AVERAGEASSET ALLOCATION CAPITAL GAINS

BEFORE TAXESDESCRIPTION OF FUNDS

PERSON WHO RECEIVES YOUR MONEY, IF YOU DIE

Gospel #3: You didn’t think you were done

• More bang for your buck $$$$$– Compliance notices go out with an informational cover letter

• My 11 year-old (5th grader) must understand the communication• Communication is focused on one issue• Take out more than 100 words on a page• Fill with appealing picture to grab attention• Play the game ‘Connect the Dots’ when it comes to disclosures

What has not worked

• Click…Click…Click…Click…Click– How many clicks does it take to “take action”?– How many logins do you need to get to destination?

• Do the plan sponsors understand provider system better than the provider?

• Stuffing the envelope– New hires do not need a 25 page welcome letter– Provide information on how to get more information

• Commingled communication– Communication campaign to increase participation does not

need to be a college course in asset allocation

What has not worked: I never learned this in college

What works- Men do not like to ask for directions

• Paper Communication- Website and Phone Number First• Electronic Communication- Link to website first• RFP

– Web demo- Invite administrative assistant for his/her reaction– Phone demo- Put provider on the spot and have them call the

800 number and see how easy it is to speak to representative • Do not bury information

– Anyone get enjoyment from reading a 100 page prospectus?

What works: K.I.S.S.

– Single targeted communication• Example: Beneficiary elections

– Dire Straits Model: Money for Nothing• Generation X and Y love when you give them free money

– Everyone loves an incentive• iPad motivation works

– Make it esthetically pleasing• Baby boomers can relate to an image of a ‘63 Corvette Coup • Savings growth if you contributed March Madness money

into 401k plan • Fill your Christmas stocking with the gift of retirement

Case Study 1: Participant Education

• Manufacturing company with Pension, 401(k) and Hybrid Plan• Does not have auto enrollment feature

– Participation Campaign (over a 2 month period)• 3 direct mailings to employees home• Mandatory employee meeting with onsite enrollment opportunity • Competition between locations for largest participation rate

– Results• Increase in participation from 58% to 75%• Increase in participation 50% amongst Hispanic employees• Contributions increased from 4.9% to 5.6%

– 2nd Campaign 4 months later on investment education and diversification

Case Study 2: Behavioral Validation

• December 2012– Company with auto enrollment 3% and auto escalation (max 6%)– Announced reduction in force – Announced company match would be cut in half– Participation rate was 78%– Average deferral was 5.3%

• April 2013– New discretionary match tied to company results– 9% drop in eligible participants– 8% drop in plan participants– Participation 77%– Average deferral 5.4%

THANK YOU!

Any Questions?Ira Finn

ira0905@gmail.comwww.benefitsofhr.com

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