GEICO is taking the adage “if you can't measure it, you can't manage it” to new heights for its retirement plans.
The auto-insurance subsidiary of Warren Buffett's Berkshire Hathaway Inc. is combining the latest data analytics and behavioral science research to personalize its employee financial wellness program.
Applying digital marketing techniques to its defined contribution plans, GEICO is adding “an additional level of financial guidance,” said 2015 Innovator Award winner Dina Pon, the company's assistant vice president of human resources based in Chevy Chase, Md. With the help of asset manager Vanguard Group Inc. and HelloWallet, a cloud-based financial services provider, GEICO employees can connect their 401(k) benefits with related checking and credit card accounts to enable “highly personalized financial guidance on a real-time basis via the web and mobile,” she added.
The Government Employees Insurance Co.'s DC plan assets totaled $2.5 billion covering about 34,000 employees, with a relatively young average age of 37. GEICO plan executives needed a new toolkit to engage this younger generation of participants. They sought to help those employees to shore up their finances while educating them on company-sponsored benefits centered on its 401(k) program.
“Grabbing the attention of a younger participant base can be difficult,” one judge said. “The use of data-driven metrics can clearly demonstrate techniques that are effective and it appears GEICO is making good use of the data.”
Grant Karsas, HelloWallet's director of client services based in Washington, said Ms. Pon and her team have a very clear focus on how to tackle the specific challenges affecting DC plan members at GEICO. “The level of engagement as to how to drive the initiative forward is phenomenal there,” he added.
The campaign combined financial education with more traditional methods of encouraging savings in the retirement plan, including an automatic 1% annual contribution increase, up to 10% of salary. Stricter limits were also placed on hardship withdrawals. As a result, 70% of the participants have opted into automatic increases and the amount of hardship withdrawals per month dropped by more than 80% as of May, according to the company.
To support employees in saving more for retirement, GEICO plan executives strengthened the toolkit available within the company's financial wellness program. For example, an app that encourages employees to create an emergency fund can help participants avoid hardship withdrawals. Other financial tools include real-time assistance to reduce debt levels, such as sending a text alert when employees reach their “eating-out” budget. By being more financially disciplined, workers have a higher chance of sticking to their 401(k) contribution goals.
“What a lot of companies are starting to realize is that the day-to-day behavior can have an important impact on the outcome” in any effort to help participants save more for retirement, Mr. Karsas of HelloWallet said. “That's the missing piece.”
GEICO used offline events to reinforce the company's online activities. Millennials were lured into a retirement workshop with the enticement of at-cost coffee from a gourmet coffee truck. The company's invitation read: “You know how good it feels to save on investment costs. Now taste how good it feels to save on coffee.”
The company can also analyze such metrics as click rates and calculate how many participants actually take action as a result of the company's communication efforts. Data can also be used to find those channels that work best to engage various groups of employees.
“GEICO's metric-driven approach to identifying their key challenges, finding the right solutions for their population and measuring the results is extremely well thought-out and implemented,” a second judge said. “Kudos to them.”
