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Jul 2013

Getting Beyond Benefits Choice Overload

Are you offering too many benefits options to your employees? Choice overload can be the reason a 401(k) plan fails the yearly non-discrimination test, says Chris Carosa in LifeHealthPro.

Non-participation in the company retirement plan is often the result of employees feeling overwhelmed, over-informed and under-guided on plan choices. Instead of choosing between the many options offered, employees bail out of participation altogether. And that decision, especially if it is made by a large number of a segment of employees, can cause problems with discrimination complaints. Even if there is no intentional discrimination, the optics may suggest a problem, which can lead to time-consuming investigation and analysis if not regulatory action.

Behavioral finance solutions can help companies improve employee uptake of 401(k) and other benefits without slashing the number of options. One of the more successful trends has been to re-label the benefits menu using “employee categories” rather than a menu of investment options (or plan options for other benefits). Categories include things like “Do-It-Yourself” or “Do-It-For-Me.”

The categories might include identical funds or plans, but the user-friendly labels increase staff willingness to tap into the system of information in the first place. In place of information blocks that contain industry phrases and catch-terms that are unfamiliar, employees find categories that relate directly to the employee’s own personal identification. This method of engagement gets employees over the hurdle of navigating the information system and draws them into actual consideration of investment and benefit plans. Once you get them that far, you can start addressing particular, personal concerns they have, and you are more likely to see sign-up numbers increase.