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Follow the

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Follow the leaders

Plan sponsors discuss five actions to overcome obstacles and help improve participant outcomes

Today’s plan sponsors face many hurdles, including participants’ lack of financial literacy, tight budgets and change-averse corporate bureaucracies. “Making a DC plan work better for participants takes dedication, cleverness, hard work and, most of all, leadership,” says Fredrik Axsater, global head of defined contribution at State Street Global Advisors. “Some plan sponsors are especially effective at this job. They can serve as an inspiration to all of us.”

A leAder is one who knows the wAy, goes the wAy And shows the wAy.” — leAdershiP guru John C. MAxwell‘‘

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ssga.com/definedcontribution22 The Participant Summer/Fall 2014

The perfecT fund lineup is useless if the people in the plan don’t think they can afford to contribute to it.

“It hit me that we had to show participants that they actually did have the means to save,” she says. “We had to show them how they could find some money to save for retirement in a pain-free way. That meant working on financial wellness and money management today.” (See “Financial Wellness: The Next Frontier” on page 26.)

Kontje’s team divided American Express’ education efforts into four categories, and now builds all education initiatives around them:

• Retirement• Day-to-dayexpenses• Protectionandplanning(includinginsurance

and basic estate considerations)• Familyandkids

The company put the reorganization into action by holding an on-site SmartSaving Fair at every location with more than 100 employees. The team organized the fair sites around the four categories so employees could spend time learning about the areas that most concerned them.

Kontje also drew on what she knew about the plan’s population to segment it into three groups with different sophistication levels, which helped her team respond to participants at the fairs. “If someone said, ‘I’m just beginning,’ we had bite-sized hints and next-step ideas ready to give them,” she says. “If a participant develops a spending and saving plan, we suggest they enroll in the 401(k) if they haven’t already. Then we talk about ways to increase their contribution. We try to make these interactions easy, free and fun.”

The fairs reached half of the plan’s participants. Kontje reached the other half through virtual savings fairs where participants could click through to videos, worksheets and other information organized around the four categories. “The on-site fair alone boosted participation in the plan from 68% to 72% at one location in a single day, and our overall participation rose from a low of 70% to 79% currently,” she notes. “Overall, our SmartSaving outreach helped increase savings rates from 7.0% to 7.9%. And we didn’t add a single new benefit—we just changed our marketing agenda to focus on the things participants were telling us they needed.”

We spoke with three such plan sponsors who share the conviction that defined contribution plans have a duty to help participants prepare for retirement. “The plan isn’t just a fiduciary—it’s the hub of participants’ retirement planning experience,” says Marcie Frost, director of the DepartmentofRetirementSystemsforthestateof Washington. “We’re in a position to make a huge, positive impact on employees’ lives.”

The plan sponsors we spoke with also share the belief that the first step in helping participants is to understand their needs. “We often jump in and do what we think participants want, or what someone saysisagoodidea,”saysJuliaDurand,deferredcompensation manager for the city and county of San Francisco. “Instead we should listen hard to participants to figure out what they want and need.”

These plan sponsor leaders shared some of the most effective ways they’ve put their convictions into action.

1Build financial literacy brick by brick

In Barbara Kontje’s case, listening to participants led her to reevaluate her job description. When she joined American Express in 2007, her primary role was to manage the plan’s investment options; educating participants about retirement issues was secondary. “But what I heard participants saying was, ‘I can’t afford to save!’” she recalls.

A lightbulb went off: Kontje realized that a perfect fund lineup was useless if the people in the plan didn’t think they could contribute to it.

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2consider participants as your customers

Marcie Frost of the state of Washington brings a private-sector mindset to the job of serving participants. “In 2013 we started thinking about our participants as customers,” she says, “and we created processes to build customer satisfaction.”

Frost’s team had surveyed participants in the past, but she was dissatisfied with the results. “We found our surveys didn’t give us actionable information,” she says. So in 2013 they began conducting monthly, in-depth interviews with recent retirees, asking the following questions:

• Howaccuratewastheinformationyoureceivedfrom the plan?

• Howrespectfulwereyourinteractions with employees at the agency?

• Howresponsivewerewe?

“We’re trying to find out what kinds of services or interactions would have helped them be better prepared for retirement,” says Frost. “We want to know how our processes could have been better as they moved into retirement. But more than anything, we’re looking for ways we can get people more engaged earlier in their careers.” The group compiles the interview results and includes them in a quarterly review, to make sure the entire organization is focused on meeting customers’ needs in those three key areas.

Frost’s group has heard two messages loud andclear:Participantsareconfusedabouttheirbenefits, and they want more of their employers’ time and attention in figuring them out. In response, Frost overhauled the structure the state government had in place to interact with employees about the plan.

The previous structure had been designed to analyze data. The job of answering participants’ questions fell to benefits specialists, whose primary function was to perform calculations and estimates. “These people felt that phone calls from participants were a distraction from their real work,” Frost says.

Frost led an effort to create a contact center that would work with participants, and separated it from the benefits specialists. “These roles have

very different skill sets,” she says. She notes that distinguishing between those skill sets has changed the way her group hires. “Our goal is to make sure we have the right people in place to give participants what they need. Everything comes down to your people.”

3whet participants’ appetitesJulia Durand is fascinated by behavioral

finance. One lesson she takes from the literature: “Peoplelikeanimmediatereward,”shesays.She

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leAding eMPloyers hAve initiAted efforts to

reach and engage employees where they

live, work And PlAy

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has found that surprisingly small perks can have outsized impacts on participant behavior.

Durand formerly helped administer the CaliforniaStateTeachers’RetirementSystem’sDC plan. “One of the most successful initiatives I ever did was to give away a canvas bag to anyone who enrolled,” she recalls. “Grocery stores were giving people 5 cents off their bill for each bag they brought with them, so we pitched this as saving them money on their groceries.”

The results were overwhelming. “We enrolled 1,500 people who otherwise wouldn’t have participatedintheplan,”shesays.“Peoplewererolling over $300,000 accounts to get a $1.29 bag. The key was that it was a gift.”

Likewise, Durand believes it is a good idea to provide food if your budget allows. “If you feed them, they will come,” she says. “When the unions want people to turn out, they provide pizza and cookies. When insurance companies want to sign up retirees for annuities, they hold events at very nice restaurants. We can take a page out of their book to get people to engage more with their plan.”

4 get up close and personal For much of DC plans’ existence, plan

sponsors on the whole took an “If you build it, they will come” approach. Over time, many sponsors realized that too few employees were taking full advantage of their DC plans, even as those plans were becoming central to participants’ retirement preparations. To bridge the gap, leading employers have initiated efforts to reach and engage employees where they live, work and play.

Like many plan sponsors, Julia Durand has noticed that people tend to get their retirement advice from others who work nearby. She started an ambassador program to turn this potential problem into an advantage. “Every department has one person everyone goes to with questions,” she says. “We are working to make them champions for the cause. They’re telling people, ‘You’ve gotta save,’ and then bringing those people to us. One bus driver alone, whom we call our ‘all-star,’ has brought in at least 10 participants.”

For her part, Barbara Kontje matches the medium to the audience. “For some parts of our population, email is very effective,” she says. “But it’s terribly ineffective for people in our call center, because they’reonthephoneallday.”Herteamreachesthose employees and others like them through home mailers. The mailers have an additional benefit: “Sometimes the employee isn’t the financial decision-maker in the household,” she says. “Mailers have a better chance of reaching that person.”

Kontje also tailors messages for specific employee networks at American Express, including groups of veterans, gay and lesbian employees, and parents. She recently conducted a Webinar for the women’s network. “So many people dialed in, it crashed our network,” she recalls.

Washington state’s young-employee focus groups told Marcie Frost that her department needed to take a livelier approach. “They told us they thought theDepartmentofRetirementSystemswasforoldpeople,” she says, laughing. “So we’re doing some rebranding.”Partofthateffortinvolvestheuseofsocial

media. Frost keeps her messages simple and relevant. “You can’t say anything complex,” she says. “Grab their attention and give them something they want to follow up on. And make sure your message is based on what they want and need to know, rather than what you’re trying to push.”

5evangelizeThese plan sponsors’ leadership doesn’t stop

at their own plans. They are passionate about making the overall retirement system work—and that drives them to encourage other plan sponsors to take action, share what they learn and build a network that ultimately makes retirement readiness a reality for more workers.

“I think anybody can do this,” says Kontje. “The prototype is out there. Let’s make it engaging for employees to take action.”

“There are many starting points,” echoes Durand. “Each plan sponsor has to know their participants, know what they’re allowed to do and figure out what works for their plan.”

Tell us what actions you’ve taken to boost

retirement readiness by emailing

definedcontribution@ssga.com; we may highlight your story in a future issue.

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For public use.

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State Street Global Advisors is a global leader in asset management, entrusted with trillions* in assets as of September 30, 2016. As one of the premier investment managers for U.S. defined contribution plans, SSGA has more than 30 years of experience in the DC market with over $319 billion in global DC assets as of September 30th, 2016. DC clients rely on SSGA to provide a powerful, global investment platform that offers access to virtually every major asset class, capitalization range and style, including low-cost index funds, a suite of QDIA-eligible target date and balanced funds, and distinct DC share classes. Beyond investment solutions, SSGA provides a dedicated DC client engagement

team that assists clients with the onboarding process and the development of thought-leading participant communications.

The views expressed in this material are the views of SSGA Defined Contribution through the period ended January 31, 2017 and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance, and actual results or developments may differ materially from those projected. The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon.

Unless otherwise noted, the opinions of the authors provided are not necessarily those of State Street. The experts are

not employed by State Street but may receive compensation from State Street for their services. Views and opinions are subject to change at any time based on market and other conditions. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information, and State Street shall have no liability for decisions based on such information.

Investing involves risk, including the risk of loss of principal. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.

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See themselves maintaining their current

lifestyle in retirement 65%

Plan to go back to school in retirement15%