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Innovations in Employee 401(k) Education Meetings Increase Enrollments

Many defined contribution plan sponsors struggle to increase their 401(k) participation rates. Most plan sponsors do very well if they reach a 75 percent enrollment of those employees who attend a retirement savings plan enrollment meeting. Even after employees are informed that the employer will match a specified percentage of their contributions (generally made on a pre-tax basis), many still do not participate in the 401(k) plan. Motivating employees to attend enrollment meetings has also been an issue for plan sponsors, particularly for those plans with enrollment of 50 percent or less. To address these concerns, employers have tried various techniques to improve poor attendance at enrollment meetings and encourage employees to enroll in their savings programs. This article discusses two such programs that aim to increase enrollment rates at employee 401(k) meetings: Transamerica Retirement Services' Plus 15 Participation Guarantee and MassMutual Retirement Service's¹ e4^SM handheld wireless enrollment system.

Some employers have made plan enrollment meetings mandatory for new hires. Others rely on managers to encourage employees to attend enrollment meetings, as well as to communicate the benefits of saving for retirement through their employer-sponsored programs to their team members. Yet others attempt to encourage employees to attend the meetings by offering beverages, snacks, or other incentives. Despite these efforts, some plan sponsors continue to express frustration with the results of their attempts to achieve a higher level of plan participation.

Greater plan participation benefits more than just the individual employees saving for retirement. Plan sponsors and firms that invest and administer plan assets also benefit from greater participation by increasing the probability of meeting non-discrimination tests, which is an essential requirement in maintaining the 401(k) plan's tax-deferred status, as well as from the additional assets under management, which serve to create economies of scale.

To help companies increase plan enrollment, Transamerica Retirement Services launched a new initiative in late 2005 guaranteeing a 15 percent increase in plan participation for companies who move their retirement plan to Transamerica. The Plus 15 Participation Guarantee is available for qualified new takeover plans currently struggling to meet their participation goals. In order to qualify, plan sponsors must have a current participation rate of less than 75 percent; make no material reduction to benefits from their current plan to the Transamerica plan; and ensure all eligible, non-participating employees attend a Transamerica enrollment workshop - the program's centerpiece --- prior to the enrollment deadline.

During the workshop, Transamerica uses certified enrollers to walk employees though a five-step process that includes investment education, determination of personal risk tolerance, savings goals and selection of contribution percentages, and plan investment options. The objective of the meetings is for employees to leave enrolled in their company's retirement plan with an actionable strategy for their retirement savings.

Plan sponsors must also provide Transamerica with current participation data, which brokers will use to conduct a free analysis of the plan environment and create a customized report outlining recommendations of key participation drivers. Plan sponsors must select a minimum of four drivers, which may include the addition or modification of loan provisions, employer match, and automatic enrollment, among others. If participation fails to increase by 15 percent within the first quarter after transitioning to Transamerica, they will refund the first quarter's administrative fees to the employer.

"Having only launched Plus 15 late last year, we are delighted to have already had a number of clients complete the program, all of which have successfully increased their participation rates by at least 15 percent," said Kent Callahan, president and CEO of Transamerica Retirement Services. "Transamerica Retirement Services is committed to helping plan sponsors increase participation rates, and we remain confident in our abilities to design a plan that will meet the needs of our clients."

Technology is also proving to be an effective tool for increasing plan enrollments by eliminating participant inertia, a frequent roadblock to enrollment. MassMutual's e4^SM, short for Electronic Enhanced Enrollment Experience, uses simple, handheld wireless technology to increase participation rates.

"Our e4 technology makes it easier for employees to join their company-sponsored retirement plan on the spot using a simple hand-held device. They don't have to fill out forms. They don't have to go home and think about it. They can make decisions right at the meeting with educational assistance from a MassMutual communications specialist. e4 puts control into the hands of the participant by leading them though every step of the enrollment process," explains Fred Castellani, executive vice president of MassMutual's Retirement Services Division.

Recognizing that participants have different levels of investment knowledge and that people generally interact with investment information in a variety of ways, MassMutual's e4 system provides three simple enrollment paths:

• "I know the way" is designed for confident investors who are comfortable analyzing information for themselves. Research and fact-gathering tools are available along with a complete listing of plan-specific investment options, including stable value.
• "I need a map" is customized for people who know about investing but need some guidance with their choices.
• "Show me the way" is the path for those who do not have the time or confidence to design their own investment portfolio. The process is made easier by providing retirement-year target horizon funds. Since these funds are not mutual funds, stable value can be used as a component of the target horizon fund. The stable value allocation under these investment options increases automatically as the targeted retirement date approaches.

Each of the investment options and asset classes offered under the retirement plan, including stable value, stand to benefit by attracting more assets with the addition of new plan participants or increased levels of contributions.

During the e4 enrollment session, prospectus materials are provided to the attendees, and a MassMutual communication specialist monitors each stage of the enrollment process. Communications and responses are appropriately tailored for approximately 20 individuals throughout the meeting, and individual participant concerns are also addressed. Larger enrollment meetings can be accommodated by holding multiple sessions with additional specialists available to assist with individual questions.

MassMutual's average e4 results are:

• 90 percent enrollment on the spot.²
• 100 percent of eligible plan sponsors elect e4 as their company standard for future enrollment and investment education meetings.
• 5-10 percent rollover leads. The transfer of rollover balances generated from e4 enrollments represents another valuable potential source of assets for plan administration and investment firms.

According to Ian Sheridan, vice president of marketing and business development for MassMutual Retirement Services, "e4 helps improve every step of the process for both participants and plan sponsors. After an e4 meeting, the plan sponsor receives a report detailing action taken by each employee without having stacks of paper forms to process. e4 helps plan sponsors reduce their administrative burden and meet their fiduciary obligations."

The e4 program provides MassMutual with valuable information about what features of the e4 enrollment process are most effective. One enhancement to e4, scheduled for release in early 2006, is designed to increase enrollment meeting attendance. The "Refer a Friend" feature will provide newly enrolled participants the opportunity to send a personalized e-mail message to a colleague recommending the e4 session. The premise is that employees are more likely to attend an enrollment session if their co-worker found the meeting to be a worthwhile and enjoyable experience.

The application of e4 as a tool to facilitate the education and enrollment of other savings plans, such as 529 college savings programs, is apparent. MassMutual is excited about opportunities e4 represents as a tool for different types of employee education and personalized messaging.

Transamerica's Plus 15 program and MassMutual's e4 have transformed the traditional enrollment meeting to a personalized and interactive experience for individuals. Plan sponsors are pleased with the resulting increase in participation. Each investment option offered under the qualified plan, including stable value, stands to benefit from increased deposits to the plan. Aware that the retention of their clients is based on their ability to deliver effective and innovative solutions to plan sponsors, service providers such as Transamerica Retirement Services and MassMutual Retirement Services strive to design solutions to meet their client's needs in an ever-changing environment.

¹MassMutual Financial Group is a marketing designation (or fleet name) for Massachusetts Mutual Life Insurance Company (MassMutual) [of which Retirement Services is a division] and affiliates.
²Percentage of participants electing a contribution rate during a meeting that had a zero contribution rate prior to the meeting. Results from all e4 enrollment meetings presented by a MassMutual Communication Specialist, 1/1/05-12/31/05.

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