How to "sell" the 401(k) to employees.
Tailor the presentation to the audience's investment IQ.
Many employees don't understand concepts such as dollar-cost averaging and the power of compounding. Surveys show that four out of five American investors are financially illiterate. Therefore, 401(k) material that is over the heads of the audience is simply not going to work. It makes no sense to jam every employee--no matter what their financial sophistication--into one room for a 401(k) presentation. If the presenter "dumbs-down" the investment information to the least knowledgeable person present, others will become bored and tune out. So consider giving employees a choice between introductory and more advanced presentations.
Show how easy it is to save.
Most eligible employees who don't participate in their company's 401(k) plans believe they can't get by with a smaller paycheck. A skilled presenter can focus on that perception and point out that, once the tax savings are figured in, the 401(k) contribution doesn't take as large a bite out of their pay as they think it will. That person also can demonstrate how easy it is to start saving. A powerful example: Saving just one dollar a day (less than the price of a cup of coffee), an employee could accumulate almost $500 in one year--even with a modest return rate.
Respect employees' investment limits.
Encourage employees to save only as much as they feel comfortable doing. When the presentation places too much emphasis on "maxing out"--deducting the maximum allowable under the law--employees whose every paycheck is a "stretch" may shy away from the plan. Instead, suggest they start small and then step up their investments. Emphasize that a 1% or 2% contribution is far better than none at all, particularly if the contribution triggers an employer match.
Monitor the presentation.
Make sure that the plan administrator is presenting the information in a fair and accurate way--and that time isn't being spent in marketing investment products other than the 401(k) package. Remember, too, that retirement education should start well before the enrollment period.
Keep the presentation light.
While the topic of pensions is certainly serious, retirement presentations don't have to be heavy and boring. Humor keeps the audience interested. The presenter should steer clear of jargon, legalese and complicated charts and graphs. Make available such things as investment tips and worksheets (to calculate the 401 (k) progress). Leave sufficient time for participants to ask questions.
Make the presentation a special event.
When announcing the presentation, make it clear that the information to be presented is important to them. Spell out why they should attend, what they'll learn and how they'll benefit. Don't assume they know these things. Think of your employees as customers. Your goal is to make an effective, high-impact presentation so they'll buy into your 401 (k) plan.
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|Publication:||Journal of Accountancy|
|Date:||Oct 1, 1998|
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