Employee Benefit News says...
Employers Raising the Bar on Financial Education

By Leah Carlson

Shepherd May 2, 2007

Worried that unenlightened employees are harming their financial lives and not making the most of their benefits, some employers are taking bold new strides to educate their workers about retirement planning and personal finance, introducing new programs that they hope will be enough to inform and motivate their workforce.

Time will tell how well the new programs work.

IBM's initiative

Keeping a pledge to help employees transition from traditional pensions to self-directed 401(k)s, IBM recently unveiled a multimillion dollar personal finance education and counseling program for its 127,000 U.S. workers.

IBM will invest up to $50 million over the next two years in the financial planning benefit, which is provided by Fidelity Investments and The Ayco Company, a Goldman Sachs firm and provider of financial counseling.

Randy MacDonald, IBM's senior vice president of human resources, believes the scope and depth of the new program, called MoneySmart, is unmatched in this country.

"This sets a new benchmark for defined contribution plans going forward," he says.

MoneySmart kicked off in March with group educational seminars held during working hours and open to spouses and domestic partners.

IBM employees now have unlimited access to confidential, one-on-one personal financial planning sessions by phone with specially trained Ayco financial planners and Fidelity financial representatives.

Online planning tools and downloadable information also will be available through a firewalled, protected Web portal hosted by Ayco.

Interested workers can read up on a broad range of personal finance issues, including investment choices, retirement income, college savings and debt management.

Remarkably, employees who call for advice get to speak with the same person each time.

"Including that [feature] was no small feat, but we managed to do it," notes MacDonald. "It's one of the differentiators."

IBM will absorb the fees associated with MoneySmart for at least the first two years.

At the end of the two years, costs will be evaluated again based on business affordability, employee satisfaction and program utilization, company officials state.

"We believe this will be the new gold standard for employee retirement and financial planning," says IBM spokesman Clint Roswell.

Employers are becoming more aware of the need for financial education and the negative impact financial stress has on the employee and the business, says Brad Barron, CEO at CLC, a legal and financial benefit provider based in Granite Bay, Calif.

"There is an absolute shift," he observes.

CLC offers financial education classes, paired with one-on-one coaching, through employee assistance programs (EAPs).

"We've been doing more and more classes. The number of employers coming on board is exploding," Barron remarks.

Revamping enrollment materials

Seeking to nudge the one-third of employees who fail to enroll in its 401(k) plan, Wells Fargo Institutional Trust Services recently introduced some redesigned enrollment materials for the employer-sponsored retirement plans it manages.

The new materials feature simple, action-oriented messages designed to educate employees and get more of them to save money in 401(k)s.

The new enrollment materials incorporate findings from industry research and focus groups held with Wells Fargo clients and employees.

The information includes streamlined messages and focuses on a simplified, three-step enrollment process: decide how much to contribute, choose an investment and enroll today.

The emphasis on a three-step enrollment process is consistent with the adult learning principles that Wells Fargo often uses in its employee education meetings.

One of these principles is that adults learn and remember best when information is grouped in threes.

In Wells Fargo's new enrollment materials, the first set of investments is asset allocation options, where an employee can make one simple investment choice.

The second set consists of individual mutual funds from which an employee can create their own portfolio.

The third option is to have investments done for workers through an advice program.

"Choosing investments for their 401(k) plan is often one of the most daunting decisions for employees," says Jennifer Plese, director of participant products and services for Wells Fargo Institutional Trust Services.

"By presenting asset allocation options first, it provides a simple solution that many workers want."

The redesign of Wells Fargo's enrollment materials is one component of the overall improvements and additions it is making to its enrollment strategies for clients.

"We are simplifying all of our tools to be more action-oriented and developing new ways to get people into the plan," says Plese.

"Research has shown that when employees are overwhelmed by choice, they will just avoid making a decision. Choosing not to save is not a good choice. We are trying to simplify the process."

Best practices

In their education programs, employers should emphasize basic personal finance issues, like budgeting and debt management. Don't talk just about retirement, advises Thomas Garman, a Virginia Tech personal finance professor and president of the Personal Finance Employee Education Foundation.

In addition, employers should encourage workers to bring their spouses, or other people closely involved with the household finances, to all of the financial education meetings because that will improve their motivation to save, he asserts.

"It's not rocket science, but it is hard decisionmaking," Garman says.

"Employees are scared. They really need their hand held in a way, where the employer is saying We genuinely care about you.'" - L.C.S.

Senior Editor Lynn Gresham contributed to this report.