Although auto-enrollment, the first pillar in the Ideal Plan, is an easy and effective way to boost participation with 52% of companies using it according to a recent Northern Trust survey, engaging employees through education is equally important and apparently successful according to the benefits managers at a Long Island based country club attending a TPSU program held at LIU.
Though many employees are lower paid, first generation workers, the country club was able to achieve a 90% participation rate though they faced many challenges including:
- Language barriers
- Lower paid mobile workers
- Lack of higher education
- Trust
Though auto-enrollment would have helped participation rates, it would not have overcome some of the trust issues – it might have even exacerbated them. So using third party partners, the LI plan sponsor set out to provide general education on the benefits of saving in the company’s retirement plan even if they only stayed for two years. But the employee base is so diverse that the benefits manager decided to provide one on one counseling as well which apparently has been very effective.
First generation workers can be a bit apprehensive about engaging in a 401(k) plan simply because of an unfamiliarity with the concept of a defined contribution plan. A human resource manager from a landmark hotel in Denver, Co. explains that new immigrants can have trust barriers when introduced to the concept of a 401(k) plan. Explaining to first generation workers that the employer will be taking money from their wages and matching a portion of their savings sounds too good to be true says the Human Resource Manager.
She has overcome some of the trust issues by introducing these workers to peers who have engaged in plans. Also, finding an Advisor who speaks the native language has also been effective in introducing new workers to a new plan.
One of the keys to improving 401k and 403b plans are confident and informed plan sponsors which is the goal of TPSU. With the new DOL fiduciary rule changing the landscape on the not so bright line between education and advice, the LI based plan sponsor at LIU concerned about his liability learned more about what he can and cannot say to employees through interaction with peers.
