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Defined Contribution

Keeping it simple is key lesson for encouraging retirement savings, experts say

But many say it's easier said than done

Warren Cormier thinks less is sometimes more, especially when it comes to excessive detail and jargon on standard DC enrollment forms.

Retirement plan executives and researchers say the best way sponsors can encourage participants to save more and save earlier is to keep the message simple.

However, making it simple can be difficult, said several speakers at the recent Global Future of Retirement conference in New York, sponsored by Pensions & Investments.

"If you don't get them in the first sentence, you've lost them," said Bernard "Bernie" Knobbe, vice president, global benefits at AECOM, Los Angeles, during a June 27 panel discussion, "Bridging the gap between financial education and financial literacy."

Mr. Knobbe said sponsors must become more aware of participants' specific circumstances. "We have to put ourselves in the employees' position," he said. "It's about awareness. We need to enable employees to put things together."

Matt Leckrone, Charlotte, N.C.-based senior vice president, total rewards, for Compass Group PLC, agreed that sponsors must tailor communication and education campaigns to specific audiences. For example, Compass Group has many hourly employees, so its financial communications focus on spending. "They need help with spending," he said. "They have to manage spending to live within their means."

Sponsors' education campaigns should focus on "age-appropriate and gender-appropriate" presentations, said Olivia Mitchell, executive director of the Pension Research Council at the Wharton School at the University of Pennsylvania, Philadelphia.

Better yet, society shouldn't wait until people have a job to get a financial education that improves financial literacy, she said. "Start in the schools," said Ms. Mitchell, noting that several states mandate financial literacy courses in high school.

Utah, Missouri, Tennessee, Virginia and Alabama require high schools to provide personal finance education courses, according to a 2015 survey by the Center for Financial Literacy at Champlain College, Burlington, Vt.

Communication simplicity can be as simple as adjusting enrollment forms, said Warren Cormier, CEO of the National Association of Retirement Plan Participants and CEO of Boston Research Technologies, during a keynote address June 27.

For example, he advised removing generic pictures of people sailing or playing tennis, adding more white space to the forms and eliminating jargon. These adjustments can increase trust and engagement among participants.

"A lack of white space deteriorates trust," said Mr. Cormier, adding that pictures of people within a standard DC enrollment form are "generally distracting."

Replacing jargon with "a more conversational tone" and providing "brief relevant details" instead of excessive details should make plan participants trust the material more, which in turn increases plan participation, he said.

"Trust allows people to take risks, to engage and to change behaviors that may not feel natural or intuitive."

Non-traditional workers

Several other speakers warned that the rising number of non-traditional workers presents a challenge to employers, government and society to encourage more people to save for retirement during a June 27 panel discussion, "Ensuring a retirement future for the growing ranks of an unconventional workforce."

The prevalence of contract-firm workers, temporary employees, on-call workers and independent contractors climbed to about 16% in 2015 vs. 10% in 2005, said Matthew Rutledge, research economist at the Center for Retirement Research at Boston College, referring to a 2016 study by researchers at Harvard University and Princeton University.

"Contingent workers are probably more vulnerable to retirement insecurity," Mr. Rutledge said. These workers "most likely, will be less prepared than traditional employees." They are vulnerable because they have less job security, or less income stability — and that means less savings, he added.

The Oregon State Treasury is trying to address some of these issues via OregonSaves, a program that offers a retirement plan to workers whose employers don't provide retirement plans and to self-employed workers.

OregonSaves now is being offered to 11 employers — with an aggregate of 150 workers — in a pilot program, with a phased-in rollout next year, explained Lisa Massena, executive director of OregonSaves, who appeared on the same panel as Mr. Rutledge.

OregonSaves could affect an estimated 600,000 workers whose employers don't offer a retirement plan as well as 200,000 self-employed workers, she said.

"If a 401(k) and an IRA got together and had a child," OregonSaves is the offspring, Ms. Massena said. For the former, OregonSaves' features include, among other services, automatic enrollment, automatic escalation and professional management. For the latter, OregonSaves enables portability among employers.

For workers who stay with OregonSaves, employers automatically deduct a portion of workers' pay. The money is invested in a low-fee IRA. The program doesn't provide investment or financial advice.

The proposed and actual changes to improve retirement readinessdiscussed at the Global Future of Retirement conference cannot come soon enough, according to a recent report by the Aegon Center for Longevity and Retirement, the Transamerica Institute and Brazil's Instituto de Longevidade Mongeral Aegon. The report was based on a survey of retirement readiness in the U.S. and 14 other countries.

The survey found that only 25% of interviewees believed they were "on course" to achieve retirement income, said Catherine Collinson, president of the Transamerica Institute and executive director of the Aegon Center for Longevity and Retirement. The online survey, covering 16,000 workers and retirees, was conducted in February. She discussed the results on a June 26 panel, "Defining the perils related to longevity and retirement models."

The Aegon report also noted that 32% of those interviewed said they didn't know whether they were on a path to achieve retirement income goals.

The others said they were somewhat — from 25% to 75% — on course to achieve those goals.

Among the report's recommendations to employers: Adopt automatic features to make it easier for workers to save for retirement; offer workplace savings plans to all workers, including part-timers; and provide education and promote opportunities to save.

Elizabeth Karier contributed to this article.