Employee Engagement With Group Retirement Plans

Right now the buzz words in the pension/group retirement world are “employee engagement”.   How do we get our employees to  a) get the most out of the plan that is being offered to them, and  b) appreciate the $’s and time that goes into offering this plan? If we back up and look 20 or 30 years ago it was a much simpler time. A lot more employees were covered by defined benefit pension plans (which a lot of time were mandatory), where you worked for a company for a number of years and you got paid out at retirement based on some pre-set formula such as 2% * the number of years of service * your final average earnings.

No thought was required by the employee until retirement when they had to choose what type of pension they wanted, either single life, joint life, etc. In any case no matter what they chose, the employee knew what their retirement income was going to be for life. Not the case anymore. Nowadays pretty much the only people that are covered by a defined benefit pension plan either work for the Government or a very large company. That means that the majority of the plans out there now, whether they are a Group RRSP, Defined Contribution Pension Plan, Deferred Profit Sharing Plan, or a combination, $ is being accumulated in a retirement “pot” and depending on how much the employee and the employee have put in to that pot, and how the investments in that pot have done, will determine how much that plan will provide them for an income when they retire. That brings us to back to the employee engagement part. The fact is that a majority of the members of these plans don’t have the knowledge and/or the desire to manage their own investments effectively, and to know how much they should be saving to provide for their own retirement. Most of the suppliers we use try and engage members through, in most cases, great web sites where they offer simplified ways to choose investments, tools to project how much $ they will have at retirement and what that will do for them in retirement, etc. The fact is though that a very large majority of the members of these plans don’t take advantage of the tools available to them on the plan provider’s web site. So what more can be done? While granted it is harder to do with a company that is very large or the employee group is very spread out, we find that one on one interaction with the members vastly increases the engagement in the plan. That starts with a once a year group meeting, with one on ones offered afterwards for 20 minutes for each member that signs up. With the 20 minutes we can go through with the member whatever topic they choose, whether that is choosing suitable investments in the plan, general financial planning questions, or doing a quick retirement projection. While certainly not every employee, or even a majority, will take you up on that offer of a 20 minute look at their personal situation, the ones that do find it very valuable and the word does get around. And, from an employer point of view, what you have done is gone a long way to meeting your fiduciary duty (i.e. the Federal Government’s Capital Accumulation Guidelines that a lot of employers don’t even know exist) because the member has been given multiple chances to educate themselves on the plan, and if they choose not to the responsibility for what their plan ultimately will do for them now falls squarely on his or her shoulders.

Paul Bajus - CLU, CFP, CHS - is the Director of Director, Pensions and Corporate Wealth Management for BF Partners. Learn more about Paul.