PLANADVISER - July/August 2017 - 26

and to saving vs. investing.
Today, plan sponsors are becoming more interested in
getting their participants engaged in their plan and motivating
them to care about preparing for retirement, Graham
says. " More plan sponsors are willing to take on the responsibility
for their employees' retirement, " he says. " One of the
reasons for that is [sponsors'] perceived fiduciary responsibility
and another is the fact that many of the retirement
committee members themselves are Baby Boomers
approaching retirement. "
One topic under discussion is how to help plan participants
make decisions, and whether automatic plan features
should be replaced with active choice, or enhanced active
choice (EAC), elements. Punam Keller, Ph.D., Charles Henry
Jones third century professor of management, Tuck School
of Business at Dartmouth College, says the problem with
automatic plan features is they fail to teach the participant
about the connections between their decisions and taking
responsibility. EAC can make participants accountable for
future decisions and prompt them to save more, she says.
She notes that active choice mandates that a participant
make a decision about whether or not to participate, much
like what happens with health plan enrollment at companies.
With EAC, the enrollment choices are augmented
beyond " yes " and " no, " to, for instance, " Yes, I want to enroll,
knowing it will help me enjoy a comfortable retirement, "
and " No, I don't want to enroll, even though this could help
keep me from living a lifestyle of poverty in retirement. "
First Things First
Still, people will be unable to adequately save for retirement
unless they get their financial house in order first, says Kent
Allison, a partner in PcW's private company services practice
in New York City. He points to the increased interest
in financial wellness initiatives and programs. " The whole
movement around financial wellness is the recognition that
if you don't focus on other financial issues besides saving
for retirement, you could be undermining the plan, because
there are issues with leakage out of the plan, " Allison says.
" Advisers can't just speak to retirement. In order to get
participants to participate in the process, advisers need to
help them get their spending under control. "
In fact, the PwC 2017 Employee Financial Wellness
Survey found that 53% of employees feel financially stressed,
he says. Asked what financial wellness means to them, 20%
of respondents said it is equally being unanxious about
their finances, being debt-free and having enough savings
to cover unexpected expenses. Sixteen percent said it means
meeting day-to-day expenses. Only 4% said it is being able
to retire when they want to.
One-quarter of those surveyed are not currently saving
for retirement. Of that group, 65% blame this on having too
many other expenses, and 50% blame it on being in debt.
Advisers need to help sponsors realize that these financial
stress points have a direct impact on their bottom line,
Allison says, because 48% of employees who are worried
about their finances say these issues distract them at work,
Other Areas of Engagement
A
nother approach that has proven
effective at getting participants
to engage in their plan and save more
is to show them how increasing their
deferral
rate affects their paycheck,
says Edward Dressel, president of Retire
Ready Solutions, producer of the gapanalysis
tool TRAK-The Retirement
analysis Kit- in Dallas, Oregon.
People can be pleasantly surprised
by how much a small increase in deferrals
can improve their savings, agrees
Diana Jordan, director of client experience
at Unified Trust Co. in Lexington,
Kentucky. A person earning $40,000 a
year who increases his deferral by 1%
would see only an $11 decrease in takehome
pay per paycheck, Jordan says.
" For someone age 35 who continues that
saving through age 67, that would add up
to $11,000, " she says. Underscoring the
value of the company match is another
way to get participants to appreciate
their 401(k) plan, Jordan adds.
Managed accounts are yet another
means by which advisers can engage
participants in their plan, because
the accounts are built on specifics the
investment manager asks about the
person, such as his risk levels, the age
at which he wants to retire, and the
percentage of his income he wants
replaced in retirement, Jordan says.
" The more information we have about
a person, the better job we are going to
do, " she says.
Natixis Global Asset Management
believes that participants could
be inspired to save more and be more
engaged in their plan if it includes environmental,
social and governance (ESG)
or socially responsible investing (SRI)
funds, says Ed Farrington of that firm.
He cites a participant survey that found
78% said such a plan is a positive thing
to improve the world while growing
their investments and that 62% said
they would be more apt to increase
their 401(k) contributions if they knew
their investments did social good.
Emphasizing other benefits, such
as health savings accounts (HSAs),
is
one way that Dan Peluse, director of
retirement plan services at Wintrust
Wealth Management in Chicago tries
to attract the attention of the participants
he serves. " HSAs have become
a little bit more of a hot topic, and we
are working to help participants understand
their value and how they can
work in conjunction with the 401(k), "
Peluse says.
All of these strategies can be
successful in inspiring participants
to take notice of their retirement
plan, understand its importance and
increase their savings, says Joshua
Ulmer of Morgan Stanley. Ultimately,
he says, " a more engaged employee
base translates into more retirementready
employees, which means the
employer stands to benefit by way
of lower health care costs, reduced
absenteeism and unclogged career
paths. " -LB
26 | planadviser.com july-august 2017
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PLANADVISER - July/August 2017

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