The power of targeted, customized investment education programs to motivate employees to join their 401(k) plans and to invest appropriately is immediately evident among the winning entries in the 1995 Pensions & Investments Investment Education Awards.
The judges of P&I's first such contest quickly found one of the most important elements for effective investment education is strong identification with the employer and the specific features of the plan.
The cream of the crop in investment education programs all exhibited a strong degree of company customization, whether the materials were prepared by in-house benefits staff, outside consultants or, most frequently, a combination of internal and external expertise.
The four contest categories were best initial investment education program (print media), best ongoing education program (print media), best educational video and best PC software/interactive educational tool. For judging, each category was further divided by company size: more than 5,000 participants, 1,000 to 5,000 participants, and fewer than 1,000.
Tied for first place in the initial communication category for large companies was J.B. Hunt Transport Inc. and Nestle Inc.
J.B. Hunt, Lowell, Ark., faced a difficult challenge - 85% of its 12,000 employees are truck drivers who are on the road as much as three weeks each month and are rarely home to receive mail, much less to be accessible during normal business hours in a company facility.
When the company decided to enhance its $900 million 401(k) plan to make it one of the best offered in the competitive trucking industry a full-blown marketing campaign was needed, said Mark Greenway, director of personnel.
The transportation company worked closely with its new bundled provider, Prudential Defined Contribution Plan Services, Moosic, Pa., to come up with an advertising campaign targeted to its employee population.
"The Road to Retirement" campaign took the theme of a road map, and used an atlas format to explain new plan features.
To reach its roving population in a popular, familiar way, benefits staff explained the new 401(k) plan on the monthly "audio magazine," company-produced cassette tapes passed out to truckers to keep them in touch with company, national trucking and entertainment news. Banners and posters announcing the new plan were displayed at every J.B. Hunt re-fueling and services facility nationwide.
Mr. Greenway emphasized the close working relationship J.B. Hunt staff developed with the Prudential team to design the investment education campaign. "Just before we began the roll-out, we were in contact literally every day with the team at Prudential," he said. "An off-the-shelf product simply would not work with our employees. The fact that customized educational materials were included in Prudential's packaged price when we were searching for vendors was a big factor in our selection of a bundled provider."
The plan's participation rate jumped to better than 67% when the new plan was introduced Jan. 1, up from near 40%.
U S WEST Inc., Englewood, Colo., swept through the contest, winning one first- and two second-place awards. The company realized early that its 60,000 employees needed investment education through several kinds of media and much repetition of the message, said Vera Updike, manager-savings/pension administration for the $2 billion savings/ESOP plan. All materials submitted for the contest were customized.
A rich company match (83% per dollar contributed by salaried employees) keeps participation very high, said Ms. Updike, but teaching employees to best use plan features is an ongoing challenge.
U S WEST used services from three outside consultants/money managers to design its initial, ongoing and video investment education programs. Bankers Trust Co., New York, helped prepare many aspects of the educational materials, including a quarterly newsletter. The Denver office of The Wyatt Co. helped with preparation of initial educational brochures. The Denver office of Towers Perrin prepared the company's investment video.
But Ms. Updike stressed that within each outside relationship, U S WEST in-house benefits staff remained fully involved.
"In the case of our initial brochures, we tried to use Wyatt staff, but we had to explain so much about our plan and its features that in the end, we ended up virtually writing the copy ourselves. An outsider just didn't know the details of our plan well enough to describe it to our satisfaction," said Ms. Updike.
The U S WEST investment staff through Don Butt, manager trust investment, also was involved.
In terms of targeting its audience, few entries came close to that of the ongoing educational efforts of the TWA Pilots DAP/401(k), St. Louis.
The content of the quarterly newsletter is determined by the fund's executive director and chairman, Joe Montanaro, to appeal to his 4,500 fellow TWA pilots. "Basically, I'm out there talking to our participants,and I really know what they want to hear and what they need to know about their 401(k) plan," said Mr. Montanaro.
Mr. Montanaro works with the plan's newsletter provider, Frank Russell Trust Co., Tacoma, Wash., to provide two or three investment topics for each issue. Frank Russell writes a first draft, which Mr. Montanaro edits and tailors to fit the employee population. Frank Russell staffers then polish up the articles and produce the newsletter.
Category 1: Initial brochures and written materials.
This category examined the printed materials sponsors give to employees when they either start a plan or make major revisions, and the materials they give to new employees to encourage participation and to show how to use the plan's investment options appropriately.
In the large plan category, Nestle USA Inc., Solon, Ohio, which tied with J. B. Hunt, developed its own materials in-house, selecting a low-key package matching the Swiss parent company's own persona and image. The package was not colorful but was classy and thorough.
Like Nestle, the first-prize winner in the medium-sized category, the Christmas Tree Shops Inc., South Yarmouth, Mass., had a simple, neat brochure. The brochure was developed by Scudder Investor Services, New York. However, unlike many other entries for this company size category, the brochure didn't shout "Scudder." It said "Christmas Tree Shops" first.
Category 2: Ongoing communications.
This category included ongoing investment education materials, such as newsletters, asset allocation programs and more sophisticated investment management training.
One of the third-place prize sharers, Rite Aid Corp., Camp Hill, Pa., offered a package especially well-targeted to a large segment of its employee population - young, mostly female store clerks. The use of company colors and logo tied the package strongly to the Rite Aid corporate image.
Category 3: Video programs, initial and/or ongoing.
For all video entries, judges looked for strong company identification within the film. Too many entries for companies of all sizes were generic products from vendors with little attempt to identify with the sponsoring companies. Often the only identification was a company tagline at the end of the film.
Category 4: PC/interactive software.
The only prize awarded in this category was to Toyota Motor Manufacturing U.S.A. Inc., Georgetown, Ky. The Toyota entry, produced by SEI Corp., Wayne, Pa., was by far the simplest to use and thus was tailored perfectly to a blue-collar work force.
In addition, the program was identified clearly with the Toyota plan and incorporated data specific to the plan.
Recognition of best practices
P&I's awards recognize sponsors' efforts to educate their employees about the complexities of investing for their retirement. The contest was initiated to identify the best practices in employee investment education and, by example, to encourage other companies to fine-tune their education programs and to demand more and better quality materials from their vendors. The contest attracted 103 entries from 62 organizations.
Contest judges stressed 16 different points in scoring entries, including:
An emphasis on starting early and saving regularly;
A discussion of the power of compounding;
An explanation of risk and the relationship between risk and expected return, and the use of diversification to reduce risk;
Historical performance of stocks, bonds and cash with explanatory information;
Emphasis on the dangers of inflation; and
Evidence of the success of a program, such as increased participation, higher individual deferral percentages, or more diversified asset allocations in employees' retirement accounts.
In addition to P&I staff, the judges for the contest were:
William J. McHugh Jr., director-trust funds, Ciba-Geigy Ltd.;
Livingston Miller, partner, Seiter & Miller Advertising;
Deborah Milne, research analyst, Employee Benefit Research
Gregg Robinson, director, RogersCasey & Associates;
Michael Scarborough, president, Scarborough Associates;
Frances Scott, personnel director, Crain Communications Inc.