It’s hard to explain why employees do not defer up to the match in the defined contribution (DC) plan offered by their employer. They are literally leaving money on the table. But it’s hard to sit down with each of them to explain.
Mandy Kaur, a corporate benefits manager at the BodyShop, explains how she created a campaign at her previous company with 30,000 employees she calls “Left on the Table” that showed plan participants not deferring enough to take advantage of the company match how much they were leaving on the table.
After depositing the annual company match, Mandy calculated how much each employee would have received if they deferred to the match and then did a simple mail merge to create a customized message. The participation match were very positively affected according to Mandy as was morale not to mention participant outcomes.
Two key takeaways: Customization is more impactful rather than a generic message. If Mandy had simply put out a notice that said that employees not deferring up to the match are leaving money on the table and even used an example, no doubt the impact would have been minimal
Secondly, the including a dollar amount, not a percentage, was huge. Most people do not relate to 50% on the first 6%. 50% of what? How much is 6%?
In Harvard’s Brigette Mondrian’s master class, one student suggested that participants should be shown the annual value of a match when deciding how much to contribute. Rather than percentages, which can be hard to calculate or understand, an actual dollar amount would trigger peoples’ aversion to losing something tangible. After participants see that amount, what if one choice given them was, “Contribute to Get Your Maximum Match?”
Well done Mandy for seeing a problem and taking the initiative to solve it!
