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Data analysis can help sponsors focus on why they might want to consider re-enrollment. “When they see the data, particularly a scattergram of participant allocations—and especially when it is their plan data—very often, that will help move the needle with sponsors,” Lester says.

Examine plan data broken down by different demographic groups to get a more specific sense of participants’ investment issues, Pagliaro suggests. “Look at the equity allocations based on age bands. That tends to be very eye-opening for sponsors,” she says. “I recommend looking at their target-date fund family’s equity allocations along [the family’s] glide path and comparing that with participants’ actual allocations by age bands. When you do that, what you typically see is that many younger investors are too conservative and many older investors are too aggressive.” Then, she says, a “targeted” re-enrollment will impact only those participants with problematic asset allocations.

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Re-enrollment works best when a sponsor targets it to specific participant groups, based on the participant data analysis, rather than having it automatically implemented in an all-encompassing way. “You want to pick your spots,” says adviser David Hinderstein, president of Strategic Retirement Group Inc. in White Plains, New York. “Every sponsor has a different set of problems that it is looking to solve for. We look at each of those problems differently.

“If the problem is how much participants are putting into the plan, that’s one set of solutions,” Hinderstein continues. “If the problem is asset allocation, that’s another set of solutions. If the problem is participation, that’s another set. I don’t want to lump them all together, unless a plan has all of those problems, in which case a ‘lock, stock and barrel’ re-enrollment sounds like a good thing. But as plans have matured, we don’t see as many that have all of those problems, especially among the larger plans. More likely, a plan may have one or two of those problems.”

Participants accept re-enrollment better when it is “lasered” to help only those who actually need the change to get on track for retirement readiness, Hinderstein says. “Let’s say that a participant has chosen to be in a managed account. Why would we move that participant to the QDIA target-date fund in a re-enrollment? The participant is already in a diversified, tailored investment,” he says.

“But if a younger participant is 100% invested in a money market fund, that’s a problem to solve for,” he says. “To use a medical analogy, if we’re [addressing] an investment-allocation problem, let’s only ‘inoculate’ those people who are at risk, and not inoculate everybody in the plan. With technology, and working with a strong provider, you really can identify who those people are and target them. Otherwise, you have unintended consequences for participants, and that angers people.”

Not every participant needs re-enrollment. “The tough part with re-enrollment is that it is even more paternalistic than automatic enrollment,” says adviser Curtis Farrell, a principal at Financial Management Network in Mission Viejo, California. “If you re-enroll every participant into the default investment, you are basically saying that no one in the plan has the wherewithal to investigate any of the plan’s investments.” So he suggests not doing a re-enrollment into a plan’s default option for participants who previously made an affirmative election on their investments.

“Otherwise, I think you’re going to cause problems,” he says. “These participants made those decisions for a reason.” Similarly, if a participant already has chosen a higher deferral rate than the plan’s default deferral rate, do not re-enroll that participant at the lower default rate, he says.

Workers’ Views Toward Automatic Enrollment, Re-Enrollment and Deferral Rates

50%
Think
employers
should
re-enroll
partici-
pants
70%
Would
accept
automatic
escalation
70%
Support
re-enroll-
ment into
target-date
solutions
70%
Think their
company
should
automati-
cally enroll
them at a
6% deferral
rate
75%
Would
prefer an
increase
in the
company
match over
a raise
90%
Would
have
told their
younger
selves to
save more
70%
Think their
younger
selves
would have
listened to
their future
selves
80%
Would like
at least
a “slight
nudge”
from their
employers
to save for
retirement
Source: American Century Investments, Fourth Annual Plan Participant Study, surveying 1,504 full-time workers