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Getting the Message Across: Better Ways to Talk about Saving for Retirement

Cultural and demographic changes are forcing employers to change the way they communicate with their employees about their retirement savings plans, according to Michael Avis, Vice President and Director of Participant Relations for JPMorgan Retirement Plan Services.

Not so many years ago, Avis told attendees at the SVIA Forum, U.S. workers tended to spend much of their lives working for one employer-an employer who often rewarded their loyal service by providing them with a pension upon retirement. That cozy relationship changed dramatically over the past few decades as employers began shifting responsibility for retirement savings directly to their employees, often by replacing their pension plans with defined contribution plans such as 401(k)s-plans that are funded, in whole or part, by employees themselves.

The pace of change has not let up. Today, workers not only save for their own retirement, they also move from job to job more often than ever, usually changing retirement plans in the process. While they are inundated with information about how to invest for retirement, he adds, what they hear tends to be off-the-shelf material that in too many cases has little relevance to their personal circumstances. At the same time, the volatility of the financial markets over the past several years-stocks soared in the late 1990s, crashed in 2000, slumped in 2001 and 2002, then rebounded last year-has left them more worried than ever about how to achieve financial security in retirement.

The solution, Avis says, is for retirement plan sponsors and their plan providers to develop communication programs tailored to their plan, their plan participants, and the investment options available to them. "There is not a one-size-fits-all solution that will work for all plans," Avis insists. "Nor is there a one-size-fits-all solution for all participants. Your communication program will matter to your participants when you recognize that each person is unique."

The need for more effective communication is evidenced in part by the number of plan participants who withdraw money from their retirement accounts before they actually retire. Avis reported that statistics from the Internal Revenue Service show Americans paid $3.3 billion in penalty taxes due to early withdrawals from qualified retirement plans in 2001. Of that amount, 50 percent was paid by people earning less than $75,000 per year. Four million tax returns included income from a premature distribution, most by people between the ages of 29 and 39-exactly the group for whom the message should be to join a retirement plan, not take money out of it.

Avis outlined a five-point plan he called "SCORE" for improving participant communication programs:

• Shared commitment. Plan sponsors and their plan providers, he said, must have mutually agreed upon goals for their communication plan.
• Consultative. Plan sponsors should insist that their providers consult with them about the sponsor's goals for its retirement plan, and the cultural and demographic characteristics of its participant population, to ensure that the communication program is aligned with the sponsor's goals and the participants' needs.
• One-to-one communications. The communication program should be tailored as much as possible to address the needs of the individual participants in the plan and communicated to them when possible on a one-to-one basis, Avis said.
• Relevant. Avis encouraged plan sponsors to use a multimedia approach to communicating with participants, so that every segment of the participant population is reached in the manner that works best for them.
• Eleemosynary. Eleemosynary is, loosely, a synonym for altruism, and in this context it refers to the notion that everything plan sponsors and their providers do in communicating about their retirement plans should have the goal of promoting the welfare of plan participants.

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