Retirement Plan Onboarding for Younger Employees

“We’ve got basically three significantly different types of generations that want information in different ways,” says Gerald Erickson, principal, Milliman Inc., in Minneapolis. In general, Baby Boomers want to receive retirement plan materials printed out: “Even if you could give them a website, they’d want to print it out and save it,” he says. Generation X is “the website generation,” he adds, and Millennials want mobile applications (apps).

“How you craft certain messages, and how people receive those messages, is definitely different among those three different generations,” Erickson believes, but most retirement plans do not account for Millennials in their plan design and communications.

“When I’m consulting with my clients, when I’m talking to plan sponsors about it, the one thing that we are trying to get across to them is helping them realize there are different approaches necessary for the different generations.” He cited recent research which found that the majority of employers have not significantly evaluated the impact of Millennials joining the work force on their benefits programs and the design and communications strategies they have in place.

“Specific to that younger population,” Matt Adamson, senior business leader of total rewards for Mastercard in Purchase, New York, says, “communicate the value to them. They’re never going to have a chance to get these years back,” particularly when it comes to the benefits of compounding. “I know it’s tough because they’re paying off college and trying to just pay rent, but these are the early years—and the most critical years, I think—to get into that habit of saving.”

NEXT: Getting new and younger employees in the plan.

“Inertia works for everyone,” says Adamson. Where possible, automatic plan features can be the best way to get young employees saving—engagement and proactive decisionmaking can come later, maybe after their financial literacy has improved.

Automatic enrollment and escalation are important, Erickson agrees, and seem to get everybody involved, regardless of generation, but especially the Millennials.

Still, “a lot of Millennials are in part-time roles,” and therefore may not be eligible for automatic enrollment in the plan, notes Jinnie Olson, client service manager, Milliman Inc. “It’s important for them to remember that just because they’re part-time, it might not mean that they’re completely excluded from being able to participate—they might just have to meet different eligibility requirements. So, rather than working a month or two like a full-time person would, it might take them a year to get into the plan, but they should keep track of [how they can] become eligible so that they don’t miss their opportunity.”

Speaking for Millennials, she says, “We’re really the first generation that’s going to have to fund our own retirement, rather than the typical defined benefit [DB] plan that’s losing popularity, and it can be really intimidating for people to hang onto enrollment packets for a year while you try to meet the eligibility requirements.”

When auto-enrollment isn’t an option, Erickson recommends making the process simple for workers. Instead of a large enrollment package, he says, send a postcard explaining the plan provision that they can sign and return. Tell participants, “You just have to sign here, and we’ll get you in at a 5% deferral rate and put you into a target-date fund [TDF]. Make it very easy for them.”

NEXT: Boosting deferral rates.

When setting up the employer contribution, Erickson says, “Matching rates are very important to incentivize people to save.” According to Olson, this is one more thing plan sponsors can do to enable Millennials. “That is huge for getting people in the plan and getting them to defer at a higher rate. If you can get them to see that this is free money that they get as a result of contributing, it’s an enormous driver to get people to up their deferrals.” Explain that this effectively increases their salary over the year, she says.

Adamson agrees, encouraging plan sponsors to show participants they are “leaving free money on the table” if they do not participate or defer enough to max out on their employer’s match.

Olson suggests having the option for an automatic increase, whether regulated by the plan or elected by the participants. Participants can set the rate increase to happen on a certain date, perhaps to coincide with annual salary hikes, and when that approaches they may receive an email that reminds them about the change. “It helps to know that you can set that on Day One and then sit back and know that [the tool] will take care of it for you every year without having to check back in.”

“Find Millennials that are in your plan that … can be leaders at an organization, that are not afraid to carry a message or are not afraid to be a case study [or] savings example or your population in your branded communications,” Erickson adds. In each generation, he notes, some people are more practical than others, and new employees may be inspired by the example set by one of their peers. Rather than the faceless graphics and trite messages that are standard in many plan materials, using the real-life examples and pictures of individuals that employees might know can be more meaningful. The more participants identify with that person, particularly if it is someone they admire, the better the results.

Instead of saying “Save as much as you can,” Olson recommends “John Doe is saving 10%, are you?” “Millennials take that as a challenge,” she says. If someone sitting next to them in the office can manage to put away that much, they can find a way to make it work, too. The competitive aspect can be very motivating, she says. “Make it into a game.”

Adamson has used competitive messaging as well. For example, “500 of your colleagues have made an election, have you?” How effective this is in any plan, though, depends on the demographics and plan design. If auto-enrollment and -escalation features are in place, this type of messaging will not have the same effect as it might on participants who have to opt in to certain benefits. The key, he says, is communicating the value of the plan and making sure individual participants take advantage of the opportunity the plan presents.

NEXT: Bite-sized information.

“You get a small window of people’s attention,” Erickson says. If you can minimize the possibility of overwhelming employees, boil plan engagement down to one or two decisions, that can really help them to get started saving. Build distinct communications, using apps and new technology to reach Millennials better than print materials may be able to. When introducing the plan, he advocates use of “bite-sized information pieces,” but also making additional information available through mobile apps or the plan websites.

Olson says Millennials want information; they want to know what they’re signing up for. “People pay way more attention to the different investment options and the fees that they’ll be paying for these plans because they do want to get out there and save, but it might just be so much information that it’s overwhelming. So, from a plan sponsor perspective, you want to be able to give that information to everybody but in a way that everyone has the opportunity to get through it and understand what it is. Rather than a 15-page enrollment packet, maybe you pare it down to two pages, summarizing everything, but then give them the opportunity to look into it more later.”

When new employees are first starting, Adamson’s company explains the benefits program more holistically, within a benefits orientation program. More targeted campaigns are conducted later, breaking apart different subsets of the participant population according to what their needs are and what communications will best address those.

“One thing we’re trying to do now is communicate in some nontraditional ways,” Adamson says. These include putting a rotating banner on their website and making use of what Adamson calls “our electronic bulletin boards.” These are screens placed around the company’s biggest offices, he says. “We might put a teaser up there and maybe an announcement [about the plan].” The message on those boards could be anything, he says, an update about the plan offering, information about election deadlines or extensions. “It could be a call to action or just something top of mind that people should be thinking about,” he adds.

NEXT: Financial wellness and education.

“If you think about the curriculum for the education system now, basically your civics classes and your [financial] literacy classes are nowhere to be found for the most part,” says Erickson. “You’re not even taught how to balance a checkbook now.” Certain school systems may include such classics, he admits, but by and large, basic money management is not taught in grade schools or secondary education. “Those are the kinds of things people are left to their own devices to figure out,” he says.

“I’ve never had to balance my checkbook,” Olson points out. “I do it now just to be careful, but everything’s online. You don’t have to balance your checkbook because you can log in and see the purchase you just made two minutes ago,” she says.

When it comes to financial literacy, Erickson stresses that different approaches to education and communication are necessary for different demographics. He suggested using custom websites, mobile apps, targeted messaging and even targeted meetings to cover financial literacy concerns for different groups of participants.

“It’s definitely a different environment, and some of the different planning tools that are offered definitely help people understand how that extra $10 that they put away now can morph into something much longer down the road when they’re looking at retirement,” Olson adds.

Take advantage of the improvement in plan providers’ tools, Erickson says, such as retirement income projection calculators. For example, he says, modeling tools can show participants how saving an extra $20 a week—say, instead of ordering a gourmet coffee every day—can have an impact over the next 20 to 30 years. If participants can see the impact of such small behavioral changes, he says, that will have a profound effect on people. “You’re not going to capture all people, but you’re going to be able to capture enough to at least help those [participation] numbers.”

In client meetings, he adds, Millennial participants have reported that they love the financial planning features that allow them to build a roadmap for their futures. Making those tools available online enables younger participants to check them out when they have the time and interest, or even when on the go, rather than taking an hour to meet with someone, Olson adds. Millennials are resistant to any approaches that make them feel they are being pushed into the plan, she says, but they do want to evaluate their financial situation as a whole.

“Another method that’s worked well for us,” Adamson says, “is we provide full financial planning benefits for our U.S. employees.” The advisers do not try to sell anything, he notes, but provide broad-based counsel. “We encourage everyone, but especially that younger population, to call in,” Adamson says. This service can help them determine how much they should put in the 401(k) plan, how to prioritize spending and saving with their income, how to maximize cash flow and manage debt. “I think the direction we’re going is that retirement is one leg of that financial wellness stool, and you need multiple components of that; it’s not just accumulating an account balance.”

“You just have to stay after it, there’s no magic bullet,” Adamson says. The industry is moving toward financial wellness, he believes, and plan sponsors should be focusing on merging each piece of that puzzle to achieve the best outcomes for their participants.