Sunday, November 13, 2005

(Not) Getting It

Many in the provider community appear to have given up on participants, and you see study after study purporting to document the futility of the cause. Studies that show employees don’t participate when they could, studies that show that participants don’t save enough when they participate – that show that they don’t invest “properly” when they do participate – that they don’t know a bond fund from a bond issue. In fact, as an industry we’ve become so convinced that participants can’t do it properly – or at least have no interest in doing it properly – that we have crafted a whole set of solutions that require no participant involvement whatsoever, other than to provide the funding.

There is a point to be drawn from these studies, of course, and there clearly is a challenge looming, even if we once thought that all we had to do was conduct a few enrollment meetings, hand out several hundred thousand prospectuses, and provide a Web site link to turn participants into savvy and enthusiastic retirement investors. “If you build it they will come” is a “Field of Dreams,” not a strategy for retirement education.

I will concede that there is a group of hardcore non-participants who have no interest in saving or investing those savings. But my sense is that that only accounts for 15-20% of workers, not the 80-85% that many now seem to place in that category.

Think that making retirement savings decisions is tough? Consider that we ask the very same group of people who struggle with retirement decisions to choose a health-care option. To assist them in their understanding, we use acronyms like HMO, PPO, PPS – casually toss around terms like co-pays, out-of-network – and distribute explanatory materials that make most mutual fund prospectuses look clean and simple. Struggling to communicate these concepts with a less-than-technically astute workforce? Years before we were inclined to dispense with paper forms on the 401(k), we insisted that workers enroll in these programs online or via the phone – AND we make people go through this same harrowing process every year.

Now, every employee’s health-care choices aren’t that complicated – but the ones that involve employee contributions frequently are (remember that we only started giving workers the ability to make investment choices after we starting funding the programs with their money). Don’t tell me that people understand the health-care system any better than they do mutual fund investments – and don’t tell me that they are any more excited at the prospect of open enrollment than they are at sitting down with their retirement plan enrollment kit. And yet, year after year – every year – those same workers who don’t “get” retirement savings choices dutifully complete those health-care enrollment forms (IMHO, the large number of younger workers who fail to enroll for health-care coverage aren’t just confident of their health – they’re probably confused by the options).

I can’t say that workers understand those health-care options any more than they do those in that retirement-plan menu, or that they make good choices, but the take-up rate is significantly higher. Perhaps the reason is that the commitment is only for a year; perhaps because the need is “here and now,” not 40 years in the future. Maybe it’s as simple as the fact that you’re more likely to get a call from personnel if you haven’t turned in a health-care enrollment form than if you don’t return one for your 401(k), or maybe it’s because you only have a small window, once a year, to act on medical care enrollment. Maybe – and this may seem a bit counterintuitive – it’s because we make them sign up for the medical plan every year, rather than allowing them to “set it and forget it.” Maybe it’s because, in a dozen different ways, we send signals that retirement saving is optional.

Whatever the reason(s), IMHO, it suggests that the problem with retirement-plan participation isn’t that workers can’t, won’t, or don’t want to “get it.” If we can get them “involved” with making decisions like health care, surely we shouldn’t have to give up on retirement savings.
Next week: Some suggestions.

- Nevin Adams

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