401k Education:
GIVING EMPLOYEES
A VOICE
By Mark Zoril
An overview of how employers can design a
retirement plan communication program that
will help meet the needs of their employees.
Contents
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Survey methodology
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Retirement Planning: Challenges and Changes
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The Impact of Input
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Levels of Risk Acceptance
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Retirement Readiness
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How do employees plan?
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How employees want to learn
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Lessons & Implications
About the Author
Mark Zoril, a 20 year veteran of working directly with employers, is the Founder of PlanVision. PlanVision helps small to mid-­‐sized employers improve their workplace reBrement plan by reducing unnecessary plan costs and enhancing employee communicaBon. 2
Title of the book
Communication &
Readiness
T
he notion of retirement readiness is emerging in the Defined Contribution
industry.
Employer-based retirement plans are expected to play a
key role in helping people of all ages and incomes pursue
more financial freedom and flexibility in their mature years.
While this would appear to be an appealing development, it is clear that many people
will face financial challenges in their retirement. Some more so than others.
As most human resources and benefits professional know, one of the most
significant workplace challenges can be providing guidance and assistance to
the employees, i.e. benefit education and communication.
We are living longer than ever and are more healthy now than we’ve ever been well
into our senior years. This longevity “bonus” offers the potential for an enhanced
quality of life. The landscape of how we support our retirement is changing.
Many defined pension plans, which historically provided income for people
throughout their retirement years, have given way to defined contribution-style
plans like 401ks. In addition, Social Security and Medicare face funding challenges
and will likely be modified for future generations. As such, the responsibility for
managing and planning our financial future falls on the individual employee, many of
whom are not prepared or equipped to handle this.
So where does that leave the plan sponsor? What should they be doing? What is the
best way for them to help the employees at their company? What can they
realistically do to help employees become “ready” for retirement?
These are the questions we set out to answer with this study.
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How Employees Want to Learn About Retirement
About the Study
PlanVision interacts with all newly eligible employees at its client firms. The
interaction is typically a 15 to 30 minute session that is done in person, by
phone, or with a video conference session. An employee can select a time at
their convenience for enrollment, either during work hours or evenings. A
professional advisor describes the plan, reviews the investment options, and
helps the participant complete the setup of their account.
During this time there is no selling of any investment products and PlanVision
is not compensated in any way based upon the decisions of the employee.
A
s a key part of this process, PlanVision administers a survey with
each participant. The survey takes anywhere from 2 to 4 minutes to
complete. The intention of the survey is to allow the employee to have
more control over how they receive service and guidance on the plan
as they enroll.
Employees can provide information
on their experience with employerbased retirement plans, investments,
and advisors. They can indicate how
far away they think they are from
retirement and how conservatively or
aggressively they would like to
invest.
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Information collected
over 12 months
From both for profit and
non-profit employers
Upper Midwest
10-19 survey questions,
depending on responses
How Employees Want to Learn About Retirement
Employees Could Use
Some Help
Where Employees Currently
Seek Advice
Employees need help, but not
necessarily everyone wants help
picking investments. A full 96%
indicated that they did want help
completing enrollment, reviewing
investments, or selecting the
amount to save.
About a third of enrollees do
receive guidance from a financial
advisor. However, only 33% of
those working with a financial
advisor would seek out their
assistance with the selections on
the retirement plan.
10% admitted to having no
understanding of investments at
all. Exactly 34% indicated that
they have a limited understanding
of investments, and another 34%
indicated that they understand
investments reasonably well but
would like assistance.
For all the other employees, a full
93% did want recommendations
from PlanVision in making
suggestions on their investments
for the plan.
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How Employees Want to Learn About Retirement
Are you on track for re.rement? 58% of respondents said they did not know if they were on track for reBrement, or were concerned they didn’t have enough saved. Of those, 70% did want to run a personalized reBrement plan at some point in the future. Eighteen percent felt like they were on track, and 23% felt like it was too far away to know if they were on track yet. For those that are on track for reBrement, 48% had planned with an advisor, 36% had planned on their own, and 15% did not plan at all but just felt like they were on track. 6
How Employees Want to Learn About Retirement
How Risky Are Employees Willing to Be?
For risk tolerance, 80% of enrollees indicated that they were anywhere from
moderate to aggressive investors.
Also, the largest single category were moderately aggressive investors, which
made up 33% of all investors. Only 18% identified as conservative or
moderately conservative investors.
In addition, 6% of those that indicated that they were moderate to aggressive
investors indicated that they would either not stay the course or may not stay
the course in a market sell off.
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How Employees Want to Learn About Retirement
UNDERSTANDING FEE NUMBERS •  95% indicate that
they understand their
Almost all observers would agree that fees matter,
however most would also agree that plan participants
have a very limited understanding of fees.
plan fees after the
explanation by a
provider.
•  95% of those also
understand how fees
can impact their
long-term returns.
But there is good news: our survey shows that if plan
participants have their plan fees explained by a service
provider in an easy-to-understand way, nearly all of them
indicate that they understand the fees.
In addition, of those who understand plan fees, the vast
majority (95%) also understand how fees could impact
their long term returns.
This is a good sign, and a great start toward helping employees understand their
retirement benefits. This should also have a spillover effect and help people become better
consumers of investment products on their own.
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How Employees Want to Learn About Retirement
Lessons & Implications
This information is unique in the sense that it is captured directly from plan
participants when they are enrolling. They can essentially establish their own
communication and education program. They can provide feedback about where
they stand for the future and what type of guidance and service they would like to
receive on their benefits.
Employees are looking for
guidance
Employees can understand plan
fees if they are presented in a
clear and easy to understand
manner and are provided with
some background on the fees.
Most investors are willing to
include volatile investments in
their portfolio. They understand
the long-term nature of the
investment and the trade off of
losing money in the short run to
have more in their retirement
account.
Very few people identify themselves as pure “do it yourself” investors. Most would
prefer to receive some guidance at enrollment in understanding the benefit and
completing the enrollment process.
Most people would prefer to get the enrollment done without deliberating too much on
the process. This is indicated by a majority who work with an advisor but will not seek
their guidance on the enrollment process.
Of those that are not do it yourself investors, a little over 50% indicate that they would
like some education and guidance through their employer and they would like it
equally on planning for retirement and on general financial planning topics as well.
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How Employees Want to Learn About Retirement
One on One Guidance Preferred
Almost all respondents prefer one on
one guidance.
Interestingly enough, more
respondents are interested in small
group learning opportunities than
webinars.
Very few are interested in seminar
type instruction if given other options.
A majority of respondents indicated that they don’t really know if they will have
enough for retirement and a full 70% of those polled would like to run a retirement
analysis if it was offered by their employer.
For those that are on track for retirement, almost 50% had used an advisor, but
another 50% had not. They had done it on their own or don’t feel like they need a
plan.
Implications of the Data
The notion of retirement readiness is emerging in the defined contribution industry.
Employer-based retirement plans are expected to play a key role in helping people
of all types pursue more flexibility in their mature years.
Moving past the Department of Labor Fee Disclosure requirements, employers and
service providers can take the initiative to help their employees understand their
plan fees with a simplified sheet that explains the fees.
However, it should also provide some limited explanation on where the fees for each
provider go.
Most people appear to be investing using appropriate long term investments that
provide the best opportunity for growth.
Far and away, most plan participants would prefer to receive guidance on a one on
one basis. This is not necessarily too surprising. However, seminars or classroom
education is the least interesting to employees.
Most people would appreciate personal guidance at the time of enrollment. It’s also
clear that a minority of employees do not want, or would not necessarily benefit
from, workplace communication on an ongoing basis. A small minority do not need it
all and others receive it from sources away from work.
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How Employees Want to Learn About Retirement
Please contact Mark Zoril to learn how to assess
what kind of guidance your employees want on
your 401k plan and how you can provide it to them.
Call: 855-965-4286
Email: [email protected]
Learn more about SurveyGizmo, the easy-to-use yet
powerful software that Mark used to conduct his study.
Visit our website: