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8 Ways to Make Your Participation Education Plan Rock

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As a numbers guy – in the insurance industry to boot – one might be surprised to know that I enjoy playing the guitar as much as I love analyzing tax-exempt retirement plans!


I’ve learned it’s one thing to own a really cool guitar (and having it sit in the corner collecting dust), but it’s another to pick it up and practice regularly so you can truly enjoy it.

Maybe the same is true for some employers with their participant education plan. The plan might look good on paper, but could use a little work in order to hit the right notes with employees. So I’d like to provide some best practices to help you create a participant education plan that can rock.

  1. Draft an Education Policy Statement. I contend it’s as important as an investment policy statement. It should clearly state the objectives of participant education, and include ways to measure progress toward those objectives.
  2. Create a written plan. The plan should tie in to the education policy statement by outlining all of the tactics used. These could include educational meetings, the messages to be delivered, who performs the various functions and a plan to review results.
  3. Clearly define objectivesin the policy statement as well as the written plan. Reasonable objectives should go beyond simple plan participation and designed to help ensure that all participants have adequate savings at retirement.
  4. Hold both group and individual meetings. They are an effective way to communicate with participants, especially with tax-exempt employers. Individual meetings can supplement general information given at group meetings, yet tailored to the specific needs of each participant.
  5. Determine what you want to tell participants. You may have a particular message you want participants to hear – like how they receive a valuable benefit that’s paid for by the organization. Or you want to increase participant awareness about retirement readiness. Make sure the education communication is delivered consistently, without different or conflicting messages mixed in.
  6. Provide tools participants can easily use to help them achieve their goals. Retirement and financial calculators are good, but additional tools that allow participants to work toward and track progress toward objectives are better.
  7. Review the quality and credentials of individuals providing the education. This can be an area in particular where you get what you pay for.
  8. Monitor progress against the plan and make adjustments when necessary. While no plan is perfect, a quality education plan will take into account what is learned from experience, as well as shifting demographics in the plan.

Since retirement plans are designed to give participants a vehicle that helps them save and prepare for retirement, they need to be accompanied by an education plan that compels them to take action and make decisions – not collect dust.

So…does your participant education plan rock? Let’s chat in the comments.


In addition to blogging here, I also tweet regularly about topics of interest to Tax Exempt plans. Follow me on Twitter: @1aaronfriedman1.

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Affiliation Disclosures

While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that none of the member companies of The Principal are rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.

Insurance products and plan administrative services are provided by Principal Life Insurance Company. Securities are offered through Princor Financial Services Corporation, 1-800-547-7754, Member SIPC and/or independent broker dealers. Securities sold by a Princor® Registered Representative are offered through Princor. Princor and Principal Life are members of the Principal Financial Group® (The Principal®), Des Moines, IA 50392.

© 2012 Principal Financial Services, Inc.


3 Comments Post a comment
  1. Gary #

    Can you suggest some “objectives” that the participant education should strive for and some “ways to measure progress toward those objectives?”

    January 9, 2013
    • Aaron Friedman, National Practice Leader - Tax-Exempt, the Principal Financial Group, Princor Registered Representative #

      Thanks for your question, Gary.

      The ultimate objective of the retirement plan is helping participants get into a position to have a more financially secure retirement. Many experts believe a reasonable objective would be to be able to replace 85% of income at retirement.* The ability to achieve that for all participants is a lofty, and potentially an unattainable goal. But an objective to maximize the number or percentage of participants is reasonable. How do you do that? In a 2011 survey, the median response among financial professionals indicated that individuals need to save approximately 15% of their pay, including employer contributions (if applicable), to have enough income during retirement, assuming they begin saving for retirement early in their career. **

      To turn that into specific goals for the plan will depend on the demographics of the population and where the plan stands today. For example, when starting with a plan with very low participation rates, goals for the initial years can simply be to increase the number of participants contributing. If there are good levels of participation, but contribution rates are far lower for example than a 15% savings target, then goals and educational plans may need to be geared toward increasing contribution rates. This can be done by electing an automatic increase provision – one that automatically bumps the contribution rate each year until it reaches a set target as well as motivating participants to take action on their own. There may be separate goals for immediate increases and automatic increase elections. It is probably a good idea to set goals for reasonable increases so that they can be attained, and increase those goals with each successive year’s education plan. It isn’t reasonable to expect a plan for example that has an average deferral of 6% to jump to 11% in one year.

      The bottom line is that if you know the ultimate objective, and you know where the plan stands today, you can build some intermediate annual goals that can get more and more participants into a position of retirement readiness.

      In addition to education, there are plan design changes geared to help participants to attain retirement readiness. Some ideas include:

      – Matching formulas can be stretched to require larger contributions from participants to receive the maximum match.
      – Implement automatic enrollment with a set deferral percentage defaulted to a number, say 6 %
      – Provision can be added to automatically increase participants contributions by default such as 1% each year

      Implementing some of these ideas in addition to the education can help attain the objective even faster. It also allows a greater focus in the education on participants understanding their retirement income needs, and gets away from efforts to simply get them into the plan.

      *Assuming pre-retirement annual gross income of $40,000. AON Consulting 2008 Replacement Ratio Study.
      **Research with Financial Advisors, June 2011, conducted by Harris Interactive on behalf of the Principal Financial Group. When looking at all responses in the survey, the median is the middle of the responses given.

      January 10, 2013
      • Anonymous #

        Thank you Aaron…these are great suggestions.

        January 11, 2013

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