Game Plan: Making 401(k) Plans a Little More Fun

At PLANSPONSOR’s Plan Designs conference last week in Chicago, a panel of retirement professionals discussed the success stories and challenges of inspiring employees to participate in their defined contribution plan.

Keep it Simple

In the age of immediate gratification, using short and simple strategies is key to motivate participants, the panelists said.

Karen Barnes, managing counsel for McDonald’s Corporation, believes that communication should be kept to a minimum, as more money should be spent on benefits and not communication, she said. That is not lip service, as McDonald’s boasts a pretty appetizing employee match, evidenced by audience members joking that they might need to switch careers to work for the fast food restaurant.

At a place like McDonalds where many of the employees can’t read and might not speak English as a first language, some strategies, such as online information, are not as effective as others. Barnes said one technique the company uses is a newspaper designed like USA Today to spread the message to employees about saving for retirement. The company also utilizes auto entrollment of qualified employees. “One of the things that we have learned is that inertia is a huge force,” she said. “And it’s actually a force that can work in your favor.”

Heidi Walsh, vice president and director of consultant and adviser relations at T. Rowe Price also addressed the need for simplicity and immediacy to most effectively spread the message to participants. While the Internet message would not work for all employers like McDonald’s, Walsh said Internet “sound bites” are increasingly where participants get their information. She also suggests using simple spreads of numbers as an effective way to motivate employees.

Anne McKillips, managing director of The McKillips Group, LLC, encouraged the audience to “spoon feed” participants information a little bit at the time, commenting that bits and pieces are the best way for people to learn. She points out that people who pick too many diet resolutions inevitably don’t end up achieving all of them; similarly, presenting too many retirement goals at once will fail. She suggests choosing one focus at a time, for instance, maybe this month the focus will be on enrollment and next month will be about improving deferral rates.

The panelists echoed that knowing what methods work for an employer are important tools to use to motivate. The culture and finances differ at every organization, and it takes trial and error, said John Mott, senior vice president and investments corporate client group director at Smith Barney.

Mott tells of a successful experience using the managers to motivate the participants. He saw a plan’s participation skyrocket from 30% to 80% when one of the bosses told employees on an oil rig that they were all idiots for not investing in the plan. Sometimes a little scare tactic can go a long way: Mott also employed the strategy of calling a local Social Security office to come to talk to employees.

McPhillips says a rumor got around the office of one of her clients that they were giving out free money. She also suggests giving employees perks to attend meetings. Money, gifts, or something as simple as cookies and lemonade can be incentives to attend the meetings.

Putting the Fun in 401(k)s

401(k)s might be a little boring, but it’s important to get employees excited about them, Mott says. However, the task is easier said than done, especially when working with the large number of employees with varying languages and cultures.

If 401(k)s scare, confuse, or bore born-and-bred Americans, what does it sound like to immigrants? “401(k) is a phrase from our IRS code; it’s not a part of the Spanish or Russian language,” said McKillips. She gives direct advice for dealing with people from other cultures: Most importantly, develop trust. Also, don’t waste time and energy on getting a translator, as it is counterproductive to building the trust, she says.

McKillips says that while meetings are important, they are not the only effective method. She suggests webinars as an effective tool for some groups of educated employees, as participants might like to have the information easily accessible at home to discuss with their family. Also, having meetings at the same time isn’t going to work for all atmospheres—take, for instance, a hospital where shifts are constantly irregular.

Mott sums it up as a need to “target the audience.” Whether on oil rigs, at hospitals, or flipping hamburgers, a different message is effective for different employees.