Sign Them Up Kevin Wesbroom, Retirement and Financial Management Consultant London, England A retirement savings plan is a key part of a benefits package—and as many companies are finding, automatic enrollment in such plans can bring real results. Recent Hewitt research shows that among companies offering automatic enrollment in retirement plans, the average participation rate was 14 percentage points higher than the rate across all companies. Such increases were especially notable among young, lower-tenure, and lower-salary employees—groups that traditionally have very low participation rates. Making enrollment the "default" option works because it taps into basic human tendencies such as inertia and procrastination. Many people see retirement planning as being too complicated or retirement as being too far in the future to consider, given the pressing needs of today. With automatic enrollment, employees can essentially plan for the future without having to think about it. It's effective enough that the U.K. government has included automatic enrollment in its proposed new National Pension Savings Scheme, and hopes that the practice will increase retirement savings throughout the country. Of course, if a company is pushing people to make a particular choice, it has a responsibility to make sure that the choice is the right one for those individuals. One size does not fit all when it comes to retirement planning. As marketers do with consumers, companies can segment their employees into groups with common traits, and then offer investment choices that cater to those segments. For example, equity-oriented investment funds may be best for young employees, while people nearing retirement may be best served by fixed-income investment funds that prepare them for the transition out of the workforce. In an ideal world, people would plan carefully for retirement—but in the real world, they typically don't. A well-designed approach to automatic enrollment can go a long way toward helping employees do the right thing.

Arm Them With Knowledge Barb Hogg, Communication Consultant Lincolnshire, Illinois Putting a well-designed automatic enrollment program into a retirement plan can be effective. But it isn't the only answer. Some companies find that supporting an automatic enrollment program is too expensive, or that issues like high employee turnover make such a program impractical. There are other strategies to boost participation. Techniques such as streamlining the online enrollment process and providing Quick EnrollmentTM response cards can help—and targeted education and communication have proved very effective in drawing nonparticipants into plans. Even companies with a good retirement plan and automatic enrollment find such education efforts valuable. Fostering a better grasp of retirement needs and investment strategies helps employees make better decisions as they move through their lives and careers. For example, employees with three times their salary in their retirement savings plan may feel well off and tempted to withdraw some funds—unless they understand that they're likely to need something like 10 times their salary for retirement. To be most effective, companies should consider a number of success factors. For one thing, it's critical to make the information relevant. Companies can send out cost-effective emails tailored to various segments of the employee population to help them understand the options that most closely fit their needs. It's also important to keep things simple. People are easily overwhelmed with retirement-planning information. Give them top-line messages in regular communications, and then provide easy-to-navigate layers of deeper information for sophisticated "power users" and those who want to learn more over time. Automatic enrollment is a great tool—but it doesn't supplant communication and education. By providing targeted, relevant information, companies can build on the foundation of automatic enrollment to help employees meet their retirement goals.  Back to Top