Administration August 31, 2016

A Public Plan Sponsor Gives Employees View of Retirement

A virtual retirement tour helped get more employees enrolled in their 457 plan and employees more engaged in their retirement savings.
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The Government of the District of Columbia offers several retirement plans to employees. Employees hired before 1987 are under a civil service retirement program, while those hired after are offered a 401(a) plan and a 457(b) plan. Police, firefighters and teachers have a defined benefit plan (DB) but all employees are able to participate in the 457(b) plan.

Employees are automatically enrolled in the 401(a) plan after one year of service, so the plan has 100% participation of eligible employees. The 457 plan is voluntary, with an aggregate participation rate of about 48%; although the participation rate in some government agencies is higher.

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John S. Henry, associate treasurer – asset management in the Office of Finance and Treasury for the Government of the District of Columbia, explains that simply because the contract for the prior recordkeeper to the 401(a) and 457(b) plans was ending, the government issued a request for proposals, and ended up selecting ICMA-RC as the recordkeeper starting in August 2015.

One of the things the government liked about ICMA-RC was the company presented a good number of tools to potentially increase enrollment and engagement in the 457 plan. The Government of the District of Columbia recognized that with most employees not having a DB plan to supplement the 401(a), participating in the 457 plan was necessary to really have enough retirement income. In addition, he says there was concern that employees didn’t understand their retirement offerings, and if they did, they didn’t know how best to utilize them.

The government asked ICMA-RC to bring some unique things to employees. One of the tools the government wanted to use was ICMA-RC’s RealizeRetirement tour, which the government offered to employees in June.

NEXT: The RealizeRetirement tour

ICMA-RC President and CEO Bob Schultze, located in Washington, D.C., says the RealizeRetirement tour is for employees of any age. “We want to get those not engaged in their plan to be engaged. And, because of the technological focus, it appeals to younger employees. However, survey feedback shows it is getting other generations engaged as well,” he says.

The RealizeRetirement tour is held in a truck that has a number of tools for employees to use.

Schultze says one tool is an animation application that allows employees to take a picture of themselves, to which then the tool places them in a trip through retirement so they can visualize what they want to do during that period. The employees are asked for their name, age range, email address, which public-sector job they hold and what they want to do in retirement—travel, hobbies, finish a bucket list. The answer to the last question creates their own animated retirement dream—a hobby could be cooking, a travel desire may be France, a bucket list could include driving a race car.

Another tool is a virtual reality exhibit. Employees put on goggles and get to see three miniature movies which pictures public-service employees in action. “It honors them,” Schultze says. “And the virtual reality goggles seem to be the most popular attraction in the tour. It’s a good way to get people’s attention, and once we have that attention, their local ICMA-RC representative can talk to them about retirement.”

Schultze notes that at each stop, the local representative is present, circulating among employees and getting follow up information. In addition, the representatives have enrollment kits with them if employees want to take immediate action.

The RealizeRetirement tour also includes a selfie station that is set up like a photo booth. Employees can have their picture taken and have it superimposed on backdrops, such as travel destinations around the world. They can text the picture to friends or post on Facebook. There are also iPads with calculators for employees to use and a prize wheel that employees can spin to win a prize.

More than 450 District of Columbia Government employees in nine locations participated in the tour.

NEXT: After the tour

Sixty-eight percent of employees who participated in the tour held one-on-one meetings with ICMA-RC representatives, and 14% of those who participated enrolled in the 457 plan.

Henry says the government has seen an increase in activity, tracked by the number of participants dialing into the 457 plan’s call center and website. “They are more engaged and have questions,” he notes.

He also says, among the population of participants who participated in the 457 plan since ICMA-RC became recordkeeper in 2015 through July 2016—after the RealizeRetirement tour—the average contribution rate has increased 7%.

Feedback from employees who participated in the tour was very positive. According to Henry, Millennials said it was an excellent way to get them to think about retirement, noting they weren’t thinking about it before the tour, but they are now. For older generations, they said it was fun, and they enjoyed seeing the videos of public employees in action. They said the tour made them rethink what they were doing to save for retirement and question whether their contribution was enough and whether their investment allocation was right. They realized the need to talk to an ICMA-RC rep.

Although, the RealizeRetirement tour relieved some of the government’s concerns, Henry says more of its locations need to be reached, and he’d like to bring the tour to these areas more than once. According to Schultze, ICMA-RC originally expected 45 stops around country, but due to demand it now has 150 scheduled.

“We definitely want to hit more locations when ICMA-RC brings the tour back to D.C.,” Henry says.

Administration August 31, 2016

Couples Need Help With Planning Retirement Together

Retirement plan sponsors can help by including spouses and partners in educational events.
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A survey of more than 1,800 Americans in a relationship, defined as those who are married or living with a partner, found that savings inaction, failure to share financial specifics with their significant other and reliance on overly conservative investments, may be jeopardizing their chances of achieving a happily-ever-after retirement.

One in three Americans in a relationship (33%) report that neither they nor their partners are saving for retirement. Among the 36% of Americans in a relationship who report that their partner is saving for retirement, roughly one in five (23%) say they do not know how much their partner contributes to long-term retirement accounts or have even a general sense of the total value of their partner’s retirement account (21%). In addition, 21% of Americans in a relationship who are personally saving for retirement say their partner doesn’t know how much they are contributing to their long-term retirement savings.

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Dayana Yochim, investing specialist for San Francisco-based NerdWallet who works in Alexandria, Virginia, says, “One of the big reasons couples don’t discuss retirement savings is it’s a distant, fuzzy target. It gets pushed to the back burner behind more immediate needs and goals. While it’s natural to focus on these, it is important to know the state of the financial union.”

Yochim tells PLANSPONSOR there are advantages to being part of a couple, and by not talking about retirement savings, they could be leaving money on the table and shortchanging their future together. “They should be working together to maximize every dollar in the household. Togetherness is very powerful,” she says.

NEXT: Using the right savings vehicle makes a difference

The survey found lack of communication also plagues those who are saving and use accounts with brokerage firms to save for retirement, with 43% of respondents stating that they do not consult with their partner about trading decisions regarding their brokerage account.

Yochim explains, “Often we see one person more engaged in the logistics of saving for retirement. That’s fine if that’s the person’s strong suit and what they bring to the relationship. But they should keep their partner informed. What if that person dies or becomes incapacitated and is unable to do those duties anymore? If their partner is in the dark, he or she won’t know what to do.”

Thirty-nine percent of Americans in a relationship who are saving for retirement use a workplace retirement savings plan, such as a 401(k) or 403(b). However, the second most common account Americans in a relationship use for their long-term investments is a bank savings account (31%), despite the fact that these accounts typically pay minimal interest.

NerdWallet explains that the financial advantages of investing money earmarked for retirement in an account designed for that purpose are clear: In 30 years, a couple that saves $5,000 a year in a Roth IRA earning a 5% average annual return will have approximately $332,000 in savings—$180,000 more than if they let their money languish in a bank savings account earning 0.1% interest.

Yochim says plan sponsors and advisers can help with general education about which accounts are best for saving for retirement.

NEXT: What plan sponsors and advisers can do to get the calculations started

Three out of four (76%) survey respondents in a relationship, where at least one partner is saving for retirement, say they’ve discussed general retirement planning issues such as at what age they want to retire, where they want to live and what they want to do. But the conversation seems to trail off when it comes to calculating the specifics. Thirty percent of survey respondents in a relationship who report at least one partner is saving for retirement say they do not talk to their significant other about how much money they will need to retire.

Again, Yochim says, education is key to help couples start crunching the numbers. General education should help employees prioritize all financial demands and provide basic rules for finances, such as paying off high-interest debt, having an emergency fund and balancing college savings and retirement. Plan sponsors and advisers can also utilize available resources, such as calculators and planning tools, to help couples see how to create a plan for their financial future.

Yochim suggests plan sponsors or advisers host a financial health day and invite employees’ partners to discuss retirement goals and their savings plan.

“When partners are on the same page and excited, it is a lot easier to get them talking together. Being able to include other members of the household in these decisions and give them a checkup about the state of their financial union will help get conversations started and help couples improve their future financial situation,” she concludes.

Findings of the survey can be found here.

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