Retirement Plan Participant Insights Study Proposal for 2014 Program Mathew Greenwald & Associates, Inc. The Diversified Services Group, Inc. Winter 2013
Background While a great deal of progress has been made in increasing enrollment rates of defined contribution plan participants, deferral rates remain too low and many participants do insufficient financial planning. Asset retention by plan providers, after participants change jobs or retire, is less than optimal, as are efforts to roll-in assets participants retain from other plans. Plan provider efforts to help participants make an effective transition from work to retirement have not been effective, although helping on this crucial transition would clearly help enhance loyalty and retain and consolidate assets. Greenwald & Associates and The Diversified Services Group, Inc. (DSG) have conducted a number of research studies over the past several years on these issues and are now proposing a multi-sponsor survey to help providers increase deferral rates, roll-ins and asset retention and more effectively help participants with financial planning and the transition to retirement. The Plan Participants Insights study has four main goals: Provide trend data on participant attitudes developed over four years in the DC Participant Experience Study, implemented by Greenwald & Associates. Refine and test ideas for increasing deferral rates and roll-ins of participants who have joined a plan in the past three years. Enhance the financial capabilities and optimize the deferral levels and asset allocation of participants who are ages 50-55 and enter the stage in which retirement becomes a more salient factor and test interest in investment options designed for participants in that age range. Test reaction to investment options specially designed for people who are within three years of retirement, measure interest in financial planning and pre-retirement planning modules for pre-retirees and gain insights that can be used to increase asset retention of retirees. This proposal describes the research we plan, which is available for a sponsorship fee of $19,500. 2
Goal and Overview of the 2014 Program Goal: Provide sponsors with insights on how to 1) increase participant deferrals, 2) enhance the effectiveness of retirement planning, 3) improve investment line-up for pre-retirees, 4) improve efforts to increase roll-ins among participants joining a retirement plan and 5) retain more assets of participants terminating employment. This study also seeks to provide additional information and trend data on participant perceptions of the retirement plan and plan providers. Methodology: A multi-phased research program will be conducted entailing both qualitative and quantitative elements. Phase 1: Refine and develop concepts, plans and products for increasing deferrals and effectiveness of attracting roll-ins and retaining assets. The concepts to be tested will be derived from continuation and extension of four previous DC Participant Experience Surveys conducted by Greenwald & Associates, previous surveys conducted by DSG and other input. Sponsoring companies will also be invited to submit ideas for concepts for testing. We will conduct 15 Indepth interviews with plan providers, brokers and consultants and other knowledgeable experts to get 1) reaction to the concepts, 2) input on how to enhance them and 3) develop new concepts for achieving our objectives of increasing deferrals, roll-ins, better planning and asset retention Phase 2: Quantitatively test the concepts, plans and products through a survey of plan participants, which will include oversamples and targeted questions for each of three types of participants: 1) those hired in the past three years, 2) those ages 50-55 and 3) those who plan on retiring within the next three years. Phase 3: Field test reactions to the most promising concepts coming out of the first two phases of the research with 12 plan sponsors. 3
Key Areas of Focus in Test Concepts The types of concepts to be developed, refined and tested in the research will include the following elements: Better automatic programs: new approaches to automatic escalation, participant reaction to different match strategies, reaction to re-enrollment, portfolio monitoring, and auto re-balancing; automatic notices and communications, asset retention strategies for job changers, etc. Retirement readiness programs: how best to determine whether participants are on track, financial planning assistance, advice programs, etc. Online tools: calculators for projecting expected level of expenses in retirement, shortfall in projected retirement income from all sources to support different lifestyle levels in retirement, getting a recommended asset allocation, etc. Investment options for those near and entering retirement: in-plan guaranteed lifetime income options, fixed indexed annuities and other products that guarantee no losses in equity markets, new approaches to target age funds for retired participants. 4
Key Areas of Focus in Test Concepts The types of concepts to be developed, refined and tested in the research will include the following elements (continued): Programs for participants transitioning into retirement: assistance with rollover decisions, when to claim Social Security retirement benefits, financial plan review, information on guaranteed income options, ongoing information and advice from provider, different approaches to deliver retirement planning, clarifying the desired role of the plan sponsor at the point of retirement, developing a process at the worksite to alert providers of the impending retirement event, etc. Account statement information: various types of projections that could be included, such as account value at retirement at current savings rate, after-tax monthly income that could be produced from projected account balance, guaranteed monthly income possible from projected account balance Use of technology in service delivery and communication: webinars, videoconferences, social media, and telephone-based support and services; innovative website features, etc. 5
A Three Phase Program: Phase One Phase One: Develop Concepts for Testing Concepts on ways that plan providers can grow and retain assets and help workers approaching retirement (ages 50-55) assess if they are on track in their retirement saving and reset their deferral strategies and asset allocation. These will be generated by the work that Greenwald & Associates and DSG have conducted over many years, as well as sponsor input. These concepts will be further refined and developed and added to by 15 in-depth interviews with plan providers, retirement plan brokers and consultants, and other experts Sponsors of the study will have the opportunity to provide 1) initial input into the interview guide, 2) comments on the final draft, and 3) feedback on the structure and priority of the concepts to be tested. Deliverables: A memo-style topline report summarizing actionable concepts, plans and products for plan providers and the rationale for why they merit further testing. 6
A Three Phase Program: Phase Two Phase Two: Test Initial Concepts, Plans and Products through Online Surveys Survey of participants Online survey of 1,200 plan participants: Including three key oversamples: 1) 300 who joined their company in the past three years, 2) 300 who are ages 50-55 and 3) 300 who plan to retire within three years Each sub-sample will be asked questions targeted specifically at that group as well as questions that will be asked of the entire sample The overall sample of 1,200 (weighted to reflect overall participant population) will also provide key tracking information from four years of DC Participant Experience Surveys Measure areas of satisfaction and dissatisfaction with retirement plan, role of plan sponsor and plan provider Measure assessment of whether savings are on-track Level of interest in projections and educational programs 7
A Three Phase Program: Phase Two (continued) Phase Two: Test Initial Concepts through Online Surveys Oversample One: Participants Hired Within Past Three Years Reaction to several auto escalation programs Current match program and reaction to stretch match formulas Information needs and level of interest in several educational programs aimed to assess if retirement savings are on track Oversample Two: Participants Ages 50-55 Level of planning for retirement Expected age to retirement Level of retirement planning and calculations of financial target for retirement Interest in retirement planning services, projections, worksheets and other information that will inform decisions about deferral level Interest in investment options especially designed for pre-retirees, including in-plan guarantees and investments in equities that guarantee no loss in value 8
A Three Phase Program: Phase Two (continued) Phase Two: Test Initial Concepts through Online Surveys (continued) Sample Three: Participants within three years of retirement Measure level of interest in several approaches to pre-retirement planning, including willingness to pay for planning services Measure reaction to several value propositions for post-retirement services for asset management, retirement planning and investment advice Learn level of interest in a number of investment options specially designed for people within three years of retirement or already retired Define the optimum role of the plan sponsor in the retirement transition process Gain insight into which communications are most effective in getting workers nearing retirement to: 1) Make a calculation of how much they need to save for retirement 2) Understand how much they need to adjust their deferrals prior to retirement to get to that retirement savings target Methodology: Online survey, using Research Now panel, of full-time employees, ages 21 and over, employed full-time, who are contributing to a defined contribution plan 9
A Three Phase Program: Phase Three Phase Three: Field-Test Concepts Developed in Phases One and Two Following analysis of results from Phases One and Two, reactions to the most promising concepts, processes and products will be obtained from plan sponsors. Input will be gathered through 12 interviews with plan sponsors in companies with plans having 100+ plan participants: Small plans (100 to 999 plan participants) 4 interviews Mid-size plans (1,000 to 9,999 plan participants) 4 interviews Large plans (10,000+ participants) 4 interviews Sponsors of the study will have the opportunity to provide 1) initial input into the interview guide and 2) comments on the final draft. Deliverable will be a presentation-style report providing recommended overall strategy, recommended programs, and implementation suggestions to maximize effectiveness. 10
Cost and Timing Information Deliverables Clients will have the opportunity to provide input at each stage of research. Clients will receive a report on the Phase One interviews, a report on the Phase Two interviews as well as two tabulation books and an electronic SPSS file of all of the data and a report on the Phase Three interviews. Finally, clients are entitled to an in-person customized presentation of the findings at their offices. Cost and Timing Information The cost to subscribe to the 2014 Retirement Plan Participant Insights Study is $19,500. The fee is payable in two installments: 60% of the total fee at project launch, with the remainder due upon delivery of the final report. This fee allows for input into all three phases of the program, reports on each phase of the research, and a data file on the surveys. The project is scheduled to launch in the first quarter of 2014, with completion by the third quarter of 2014. Optional Oversample For an additional fee, study sponsors can have an oversample of their own plan participants. Sponsors can select up to 12 minutes of questions from any of the Phase 2 survey for their company-specific oversample. The survey can be implemented online, if email addresses are available or by telephone if home addresses are available. Each company oversample is available for $10,000 if implemented by email and $15,000 if a survey of 200 is implemented by phone. This cost includes a written report. If no report is required, $5,000 can be deducted from the cost of the oversample work. 11
Background on Our Firms Mathew Greenwald & Associates, Inc. and The Diversified Services Group, Inc. (DSG) have both worked with numerous client firms in the financial services industry on meeting the needs of retirees. Believing that the combined expertise, breadth and depth of the two organizations, particularly with regard to addressing retirement market issues, will provide greater value to our clients, we have joined forces to conduct this syndicated research project. The united effort brings significant resources to bear on this research initiative, and clients will benefit from both firms participating in the project execution, the analysis of the findings, and the development of ideas and solutions for complex market issues. Our firms have already completed a number of projects together and found a synergy in our partnership that provides extra value to our clients. For more information on this program contact either: Borden Ayers, DSG, at bordena@dsg-network.com or 610-989-1710, ext.21 or Matt Greenwald at mathewgreenwald@greenwaldresearch.com or 202-686-2510, ext. 101 12