With Election Nearing, How Should Plan Sponsors Communicate With Participants?

The U.S. presidential election is only days away, and polls show Democratic Vice President Kamala Harris and Republican former President Donald Trump neck-and-neck.

An uncertain political environment could cause volatility in the stock market, and retirement plan participants may see some changes to their 401(k) plan balances. As a result, plan sponsors should focus on how they are communicating with participants to dissuade employees from making any rash changes to their investment plans.

Holly Tardif, director of retirement at Willis Towers Watson, says while elections can bring short-term volatility, the market historically has recovered over time. She says plan sponsors should work with their recordkeepers to send out communications to encourage people that 401(k) investments are structured for long-term growth and are built to withstand market ups and downs.

“It might be a good time to bring forward communications about market volatility and help participants feel more secure and less inclined to make impulsive decisions,” Tardif says.

Tardif adds that participants may feel anxious, and plan sponsors can help by highlighting financial wellness resources available to participants, like educational sessions focused on investment fundamentals or access to a financial adviser.

Keep the Big Picture in Mind

Rob Austin, head of research at Alight Solutions, says plan sponsors should focus on communicating about the importance of long-term saving, as opposed to getting into politics.

In fact, Alight found in its 2024 International Workforce and Wellbeing Mindset Study that 48% of employees do not want to hear political discussions in the workplace. Only 28% of workers said their employer encourages political debate.

“I think a lot of plan sponsors are very apprehensive to say, ‘There’s an election coming up … become more conservative with your investments.’ … If anything, it’s just more: Keep [your] eyes on the long-term prize,” Austin says.

Megan Yost, senior vice president and engagement strategist at Segal Benz, says it may also be a good idea for plan sponsors to target communications toward specific age demographics of their population.

“The participants that are closer to retirement will feel the impact of down markets, and it’ll make them more nervous, because retirement is closer and it’s more tangible,” Yost says. “So it might be beneficial to send targeted messaging to older participants and reiterate some of these messages about talking to a trusted financial adviser first before making a decision.”

Kelli Send, co-founder of and senior vice president at Francis LLC, says her firm offers webinars about the importance of diversification and staying the course with long-term investments. She says these could provide some peace of mind leading up to a “scary” and uncertain event like the election. She adds that having financial planners at the ready who can talk through concerns with employees before they make any quick decisions is key at times like these.

“What we always preach is this idea that if you make a decision that is market-timing-based, then you have to be right twice, because you have to know when to put [the investment] back,” Send says. “The scary thing that [you were] worried about is over. Then you say, ‘Now what do I do? When do I put it back?’”

Possible Steps to Take

Send says sending written newsletters, as well as holding live webinars, to educate people about the topic has been effective in the past.

Austin adds that now might also be a good time for participants who manage their own investments, rather than participate in a target-date fund, to think about rebalancing their accounts back to their planned asset allocations, especially as the stock market has been up about 20% year to date. While some employers offer automatic rebalancing, others do not, and Austin says it is beneficial to rebalance at least once or twice a year.

“I think it’s a good time to kind of ask some of those questions of: ‘How should I be invested?’ and ‘Is this the right allocation for me?’” Austin says.

Send says asset allocation very much depends on a person’s age and risk level. For pre-retirees, Send says now is a time to allocate more conservatively, something to consider when looking at a potential rebalance.

Ahead of the election and its aftermath, many banks, brokerages and investment managers are adding staff to handle the high trading volume expected in the coming weeks.