Sponsors telling employees about an upcoming investment re-enrollment should clearly articulate that they are not being forced into it, Brown recommends. “The sponsor can explain, ‘If you’re happy with the investments you have now and don’t want to change, you should go in and confirm your investment election. If you don’t do that, we will move you into the default,’” she says. “Make it clear that they have a choice and that they can opt out of the investment re-enrollment.”
When employees learn about a coming re-enrollment that includes not just their investments but their deferral rates if they are participants, or their being enrolled as nonparticipants if they never joined the plan, they worry most about whether they can afford it, Warye finds.Story Continued Below
“Many employees are living paycheck to paycheck, so saving is a hard idea. They say, ‘It’s going to come out of my check and affect my take-home pay,’” he says. “So you can show them [hypothetical] examples of the impact on the paycheck of employees making $25,000, or $30,000 or $40,000. They can see that it is not a big hit out of their check” because of the tax breaks.
Farrell has seen that showing employees the limited reduction in take-home pay, together with the considerable upside of retirement-savings accumulation, goes a long way toward gaining their acceptance. “We try to show them, ‘Hey, this really is not going to have much of an impact on your paycheck,” he says. “Once they see the lack of impact, together with how quickly the money will grow in their account, they do stay in the plan. You just have to get them over that hurdle.”
Give employees a simple explanation of how they will benefit from a re-enrollment, Pagliaro recommends. “We have found that effectively communicating what the objective of the re-enrollment is will help people understand why their employer is doing this,” she says. “Clearly say, ‘This is why we are doing it, and this is how we think it will benefit you.’”
With the right upfront participant communication, McQuillan finds, achieving widespread acceptance of re-enrollment is fairly easy, even when it increases employees’ deferrals. “First, let them know what kind of deferral rate is needed to succeed in retirement planning. Then share what happens if they continue as they are,” he says. “And then explain, if they follow through with the re-enrollment instead, what happens to their long-term results in saving for retirement. You can show them, ‘Look, here is the pathway. If you want to get in the game and have a reasonable chance of success, this is a great way to do it.’”