ira finn april 23, 2013 best behavioral practices for save more tomorrow physical financial personal
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Ira FinnApril 23, 2013
Best Behavioral Practices for Save More Tomorrow
P H Y S I C A L
F I N A N C I A L
P E R S O N A L
2
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
4
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
P H Y S I C A L
F I N A N C I A L
P E R S O N A L
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