Vol. 48, No. 7
Educating employees about retirement planning is an area where you need high touch more then high tech.
Planning for retirement involves more than redistributing the assets in a 401(k) plan. To make the most of life after leaving the full-time workforce, experts say, employees should start long before their final days on the job to become familiar with the multiple dimensions of retirement and the decisions they’ll face as that day approaches.
In fact, the communications that employees receive about programs such as defined benefit and defined contribution retirement plans form just one segment—although doubtless the most important segment—of the full retirement picture. Employees should also be made aware of matters such as Social Security, health insurance and even the options for returning to the workplace at a reduced pace after retirement.
Is there a role for HR in helping employees understand the many aspects of retirement? Absolutely, says Patricia Boulerice, PHR, director of human resources for the Resource Center for Independent Living in Utica, N.Y. “The more equipped that you make your employees in order to plan their retirement, the more smoothly that transition will occur.”
Boulerice, whose center helps people with disabilities become integrated into the community, says: “We need to be educated better before it’s too late. As the employer, I need to provide that information to our employees so that they can afford to retire—and so we can attract new talent.”
Helping employees plan for retirement will increasingly become “a hot topic” for employers, Boulerice adds, because “there are so many people who are going to be retiring in the next 10 to 20 years.” Those retirees are the oldest of the baby boomers, and many face the prospect of diminished income and curtailed health benefits—results of economic sluggishness and steep rises in medical costs.
Health coverage after leaving the workforce is a special concern for most older employees, Boulerice says. “I think that’s probably one of the most frightening aspects of retiring now. Each year you might want to have a recap prepared for those people who are starting to think in terms of retirement, to lessen their fears a little bit. With health care costs getting higher and higher, this is a very important factor for employees in determining whether or not they can afford to retire.”
Brenda Franklin, SPHR, a human resource manager in banking in Fargo, N.D., agrees. “I think that information on the company’s health plan is very important,” she says. “Lack of health insurance can keep an employee from retiring. It’s important that the employee get information on coverage and cost of coverage for other family members like a spouse.” Information on any employer-provided coverage to fill the gaps in Medicare would also be of interest.
In addition, as employees become more informed about their retirement prospects, some may discover that they “are probably going to have to work to supplement their retirement income,” says Boulerice, “so options like post-retirement employment need to be available.”
Approach, Timing And Method
How an employer communicates with employees about retirement matters may depend on characteristics of the employee audience. “Not every group of employees may be impacted the same way,” says benefits specialist Jill Bergman, principal and communications consultant in the Melville, N.Y., office of Milliman USA, an actuarial consulting firm. “Understanding the demographics of your workforce is an important consideration.”
For example, Bergman says, “with traditional plans and defined benefit plans, the value changes as we age. For 20- and 30-year-olds it’s not necessarily in the forefront or focus. As they cross over that threshold, it becomes more important, and, as they near retirement age, it becomes very important.”
Opportune times to communicate such information include new-employee orientation and open enrollment periods. But Bergman and others maintain that such communication is not a one-time event, that in fact it should be a multi-faceted education process throughout the year. “Continuing communication is important,” Franklin says.
Providing the information doesn’t have to take a lot of time, cost a lot of money or be high-tech, according to Boulerice, who has started the process for her employees—and herself. “We’re going to install a resource rack and reserve an area in the building specifically for retirement communication,” she says. The rack will include, among other things, 401(k) plan prospectuses, news articles on Medicare and Social Security, and materials such as videos from retirement plan administrators. She also asks employees to bring in articles on retirement matters, she says. “Let’s share the knowledge.”
Lecturer and author Jordan Goodman, who wrote the “Everyone’s Money Book” series on personal finance subjects—including a book on retirement planning—says that educating employees about retirement planning “is an area where you need high touch more than high tech. When people have questions, they want to talk to somebody.”
Although Goodman says seminars can be effective—and admits he may be biased because he derives income from conducting them—he adds that they may not work if they’re not offered at times and in places that are convenient for employees. “I would do them in an hour at lunch time, right there in the conference room on their floor,” he says. “Making seminars very convenient is important if you’re going to get attendance. You have to bring it to them.”
While most HR departments may not have specialists in all the areas of retirement planning, they can easily “connect employees with the experts,” says Boulerice of the independent living center. “There’s so much information available. Call the local Social Security office, provide employees with a list of web sites they can visit.”
Another way that HR can tell employees about retirement planning, Boulerice says, is to hold an annual retirement planning fair and bring in experts on various subjects—representatives from the local Social Security office, independent financial advisers, banking representatives (to discuss management of individual retirement accounts), and your company’s own insurance and benefit providers.
In fact, according to both Boulerice and Franklin, vendors and consultants in the community can be excellent resources on retirement-planning issues. Franklin, who chairs the Compensation and Benefits Committee of the Society for Human Resource Management (SHRM), says plan providers “are generally more than happy to talk about a variety of retirement subjects from a ‘neutral’ standpoint for the opportunity to gain visibility. They have a good deal of expertise to share and will generally abide by the rule of not selling their product during the presentation, but giving general information.”
On dealing with federal programs for retirees, however, Franklin sounds a note of caution: “I would not recommend that employers give a lot of detail on Social Security and Medicare other than brochures or basic information; this can better be handled by experts at the Social Security Administration office.”
Show Them the Money
Another cautionary note for employers pertains to helping employees chart a course for managing their retirement assets. Companies need to be careful about crossing the boundary between education and advice.
Financial education, which employers that sponsor 401(k) plans are required to offer to plan participants, provides general information to help employees make investment choices. Financial advice, on the other hand, provides specific recommendations about which options to choose, and current federal regulations stipulate that only independent advisers can offer such advice to employees.
In other words, as the employer you can inform employees of their options and what the options mean—addressing their question “What can I do?”—but you might be ill-advised to answer their question “What should I do?” (See “Helping Employees Work Their 401(k)s” in the June issue of HR Magazine.)
Within the realm of financial education for retirement planning, there are two broad communication issues, says Gary Kushner, SPHR, president and CEO of Kushner & Co., a national employee benefits consulting and administration firm in Portage, Mich. There’s general information about the basics, such as defining a stock, a bond, a fixed-income investment. Then there are questions of what the retirement plan means to the employee individually and how to provide employees with tools to enable them to do some “what if” projections and planning on their own.
“Up until about five years ago,” says Kushner, “these tools were pretty much out of the hands of rank-and-file employees. To me, the democratization, if you will, of retirement planning and the tools for retirement planning have been a wonderful step forward. Today the lowest-paid employee with access to the Internet, through work or perhaps at home, can benefit from these tools.”
As technology expands, greater interaction will become possible, according to Jerome L. Mattern, SPHR, an HR manager for a manufacturer in St. Cloud, Minn. He says the webcast approach, for example, is rivaling the popularity of the live presentation as a means of informing employees about retirement options. “It may be the flexibility, or it may be that it seems less infringing.”
Mattern adds that in his contacts with other HR professionals, largely as a member and former chairman of SHRM’s Compensation and Benefits Committee, he has found that “more and more people want one-on-one attention.”
Banking executive Franklin makes a similar observation: “When employees are ready to retire, the employer should be able to give them information on a one-on-one basis.”
A Sign of Leading-Edge HR
Kushner says that “if employers aren’t doing a good job communicating with employees about their retirement benefits, they’re wasting their money.” He says the era in which the employee was viewed as a passive recipient of benefits is past, and now “leading-edge and more-strategic HR professionals want to educate employees about retirement benefits, not just communicate with them.
“If the employer’s goal in having a retirement plan is to achieve the strategic objectives of recruiting, attracting and retaining employees, then they’re going to have to educate employees about what’s being provided, how it works and how the employees—and their families—can maximize the benefits offered.”
Moreover, Kushner says, employers should not underestimate their employees’ ability to understand the intricacies and options of their retirement plan choices. “When it comes to planning, employees have a remarkable grasp on what they would like to see. If you give them the proper tools and some education on how to use them, employees can do some remarkable things.” Lin Grensing-Pophal, SPHR, is a Wisconsin-based business journalist with HR consulting experience in employee communication, training and management issues. She is the author of Human Resource Essentials:
Your Guide to Starting and Running the HR Function (SHRM, 2002). She is director of corporate communications at Luther Midelfort-Mayo Health System in Eau Claire, Wis