Defined contribution execs refining tools to reach millennials

As they court the defined contribution version of the youth vote, plan executives are seeking ways to convince their youngest workers to save more and save earlier.

They have found through research, focus groups and trial and error that the younger workers — the millennials, who are between 18 and 34 — respond to different strategies for education and communication than older workers. They do so not only because they are more tech savvy, but also because they have financial challenges that are more immediate than thinking about retirement decades in the future.

“Millennials already understand that they need to save, but they weren't saving enough,” said William Gheres, director of retirement planning and administration for Erie Insurance, Erie, Pa., which has a $556 million 401(k) plan and a $563 million defined benefit plan. “They saw that their grandparents and parents worked longer than they wanted to.”

Research by Fidelity Investments, Boston, shows millennials respond best to education campaigns that encourage them to talk with people who can help in a “more personalized way,” said Nancy Emerson, managing director of customer experience.

Thanks to a special project conducted in late 2013 and 2014 with several clients — including Erie Insurance — and Fidelity executives, Fidelity compiled a list of millennial myths to share with clients. One of those myths: Social media is the preferred or trusted source for financial information.

“We had been listening to clients about their pain points,” and reaching millennials was one of them, said Ms. Emerson, the lead educator of the “design thinking project.” The goal was to find ways to improve problem-solving, and it led to the millennial-myth document.

Interviews with younger workers both inside and outside Erie Insurance led Mr. Gheres to a greater understanding of their attitudes and approaches to educating them about retirement.

Younger workers — about 10% of Erie's 4,800 employees are under 30 — valued collaboration and had a “high level of distrust” of financial professionals pitching products. “Millennials say technology is a tool — not a solution,” he said.

His company's financial-wellness education emphasizes taking immediate steps rather than thinking 30 or 40 years into the future. “We want them to concentrate on short-term actions to get them to their goals,” he said. “Short-term actions on a repeatable, long-term basis.”

For example, employees are encouraged to prepare a budget that incorporates investing in the 401(k) plan. In that way, he added, participants focus on what they can do today and tomorrow, rather than think about far-off retirement.

“Millennials prefer to talk more to peers” than do older workers, said Drew Wineland, vice president of participant services for Wells Fargo Institutional Retirement & Trust, Minneapolis. “They learn from people in similar situations.”

Wells Fargo has offered a pilot project for clients to discuss financial issues common to younger workers' experiences in front of an audience of plan participants.

Internal Wells Fargo research and other studies show, for example, that millennials want personalized guidance to help them make financial wellness decisions. In a 2013 client survey, 74% of millennials said they wanted to work with a financial representative to develop a financial plan. Among its record-keeping clients, 1.5 million of the 3.5 million participants are millennials.

One Wells Fargo client that offered the millennials' pilot project is Brown-Forman Corp., Louisville, Ky. “We jumped at the opportunity,” said Donna Wimbec, senior manager for global benefits compliance.

The Brown-Forman pilot project featured a panel of two young workers, a baby boomer and a Wells Fargo representative discussing financial issues before an audience of 40 employees. The September discussion also was available as a webcast.

Among the attendees, 52% said they would change their asset allocation and 41% said they would increase their contribution, Ms. Wimbec said.

The company has a 401(k) plan for salaried and non-union hourly workers with $425 million in assets, a $20 million union-employees 401(k) plan, and two defined benefit plans with combined assets of $565 million.

Among people younger than 30, Brown-Forman has a high DC plan participation rate — it's now at 93.3% — due to auto enrollment, but Ms. Wimbec said financial wellness education continues for younger workers “to help them achieve a good financial foundation and make them better consumers of their benefits.”

Precise wording is an important part of this effort. “When you are 27, the word "retirement' is a foreign word,” Ms. Wimbec said. Instead, Brown-Forman uses phrases like “taking financial control in your 20s and 30s” and “your future is served.”

Another Wells Fargo client that offered the pilot project is Carilion Clinic, a not-for-profit health-care organization based in Roanoke, Va. “There was a very positive impact,” said David Moulin, senior human resources analyst.

The panel discussion — featuring Mr. Moulin, two younger workers and a Wells Faro representative — focused on financial, investing and retirement topics. Sixty-five percent of the audience took some action; two-thirds of this group increased deferrals and one-third changed allocations. The panel discussion will be offered again next year.

Millennials account for 35% of the 2,000 employees at Carilion Clinic, which has two 401(k) plans and one 403(b) plan with aggregate assets of $500 million, as well as a $600 million DB plan.

Improving deferrals by millennials and other participants “will take time,” said Mr. Moulin. He wants the average contribution rate to reach 10% of annual salary. Now, the average overall is 6%; for millennials, 4%.

At Cornell University, Ithaca, N.Y., Mary D'Ambrosio Zielinski looks at financial wellness in much the same way she views health care. “We stress preventive retirement planning in the same way we stress preventive health care,” said Ms. Zielinski, associate director for compliance, financial education and retirement plans. Cornell has two 403(b) plans with aggregate assets of just over $4 billion.

Since early 2013, Cornell has undertaken a special effort to improve the financial literacy and retirement planning of employees younger than 35 who account for about 19% of participants in the university's retirement plans.

Younger workers are most attracted to workshops and webcasts — several are held every semester — focusing on specific topics such as debt management rather than on broad financial planning topics. They have responded best to e-mails, short videos and webcasts, and interactive financial wellness calculators, Ms. Zielinski said.

“They want to hear from people like them, so we use younger presenters in workshops,” she said. “They don't like the word "retirement' so we say "saving for the future.'”

Last year, employees younger than 35 accounted for 8.6% of 403(b) plan participants for whom TIAA-CREF is the service provider. This year, it is 16.5%. (TIAA-CREF covers about two-thirds of participants; Fidelity is the other service provider; participation among young participants rose by 30% between 2014 and 2015.)

Ms. Zielinski likened Cornell's financial wellness efforts to the requirement for all Cornell undergraduates: they must pass a swimming test to graduate.

“If they can swim in the financial world without being pulled under,” she said, “we have achieved our role to provide this life skill as an educator and an employer.”