What’s Your Policy for Educating Employees About Retirement?

All too often, we see 401(k) plans that have become a “set it and forget it” proposition. Not just with the investments and plan design, but with education. In addition to having outdated fund lineups that have never changed (Fidelity Magellan anyone?), and plan design features that no one can remember implementing, it should come as no surprise when the plan sponsor doesn’t have any idea what their participant education strategy is.

If the plan sponsor already works with an advisor, they might vaguely remember the advisor coming out once or twice in the last 5 years to enroll some new participants. Or, if they don’t have an advisor, they may recall that their record keeper/TPA charged $1000 per day to come out and conduct a group meeting. Neither of these is a very effective strategy for ensuring your employees can retire on time and with dignity.

Although relatively recent on the 401(k) timeline, Education Policy Statements are getting more and more attention. These are written policies or procedures that outline the type and frequency of participant education sessions.

If you think about it, it really just makes sense. From a business standpoint, company leaders are always encouraging employees to have written procedures. Performance reviews are given to encourage employees to stick to an improvement plan and advance to a better job. Disaster policies and procedures are documented and practiced to keep everyone safe. Doesn’t it stand to reason that when we implement a 401(k) plan that we would document a strategy for making sure employees both understand and take advantage of the 401(k) plan?

Just as an Investment Policy Statement (IPS) is important to help govern the selection and ongoing monitoring of the investment options in the plan, having an Education Policy Statement (EPS) can ensure that your plan is effective in meeting the needs of your employees. It does not have to be a 15-page document. It can be as simple as a couple of pages that you and your advisor put together that outlines the strategy for educating your participants about the plan’s features and benefits.

With more and more emphasis on plan health and retirement readiness, it’s hard to achieve either of these goals without putting a plan in place, and that starts with your employees. Each plan is unique and has different needs, and each EPS will be different. But retirement targets can’t be hit if employees don’t know what they are aiming at.