Face it – not all employees check their defined contribution (DC) plan account balances and, even when they do, it doesn’t mean a lot to them. One plan sponsor attending a TPSU program in Georgia explains how he got “personal” with employees by showing them their account balance which got many to increase their deferral rates.
The benefits manager of a car dealer in Georgia with 140 employees regularly goes out on the floor and gives some employees a note with their DC plan account balance. Many are pleasantly surprised and ask how they can increase it while colleagues start asking about their balances. This simple action, which the benefits manager repeats regularly, has gone viral.
The effects? Employees regularly ask what they can do to increase their balances. The benefits manager advises, “Put another 1% away and let it go for six months and if you don’t notice it, do it again.” What’s 1% for a $50,000 employee getting paid bi-weekly? That’s about $20/pay period or $10/week. Seeing the account balance grow may be more rewarding than that latte at Starbucks.
Though behavioral finance using auto-plan features is important and impactful to getting people into the DC plan as well as saving more and saving wisely, it does not mean we should be giving up on finding ways to engage employees in their financial wellness. There’s something really great about a person taking action and seeing the benefit – like going on a diet and exercising and then going on a scale to see how much weight has been lost – rather than someone doing it for them. The simple act of handing a person their account balance and making the suggestion that they gradually increase their deferral rates can be impactful and can go viral as the innovative car dealer in Georgia learned.
Because as much as DC providers’ website have improved, showing an account balance will not spur many to action.
