Education Policy Statement

Nicholas Zaiko, CIMA®

Investment Consultant

Bridgebay Financial, Inc.

www.bridgebay.com

Plan sponsors understand the importance of managing a well-designed retirement plan for their employees.  As deferral rates increase and automatic plan features help encourage savings in defined contribution plans it becomes increasingly important to have a financially literate workforce.  Education is a critical element in ensuring that employees have a good understanding of their benefits.  Employees place their trust in their employer to provide for their best interests.  Education designed to help the employer’s workforce achieve financial stability through retirement savings and sound financial practices is universally well received and appreciated by employees. 

As a plan sponsor, the decision to implement and maintain an education program for employees is integral to pursuing a prudent process and is just as important as selecting the investment options for the defined contribution plan.  Effective employee communication enhances the participants’ awareness of the retirement plan’s features and guides participants to create their own retirement savings portfolios and implement appropriate savings strategies.

Once a formalized education program has been established, participants tend to express greater confidence in their ability to save for their future.  A transparent and well-communicated retirement plan strategy engages participants and forges a partnership in the savings process. 

Education should be targeted to the level of understanding of the employees and participants in the plan.  There may be different levels of understanding, personal circumstances, savings rates and stages in life.  All of these differences may require multi-pronged education programs that address the participants’ unique needs.  Employee surveys and targeted communications are instrumental in optimizing the educational process to achieve positive results.

Education Policy Statement

Most plan sponsors provide a basic level of education for their participants.  Developing an Education Policy Statement documents the employer’s commitment to provide financial education to participants by establishing a framework for a well-structured and communicated program.    Crafting this document provides direction and procedural guidelines for key members of the plan sponsor staff to make decisions regarding the content and implementation of the education program.

The plan sponsor’s approach can be very paternalistic and highly protective of the employees’ best interest in providing for financial literacy and personal finance beyond the requirements of the retirement plan.  Some plan sponsors may play a more limited role that is specific to communicating the elements of the retirement plan to its participants. 

The objectives of the education plan may be to enhance employee engagement, encourage better savings, promote financial wellness and improve employee retention and loyalty.

Benefits of an Education Policy Statement

An Education Policy codifies the plan sponsor’s educational aspirations and documents their commitment to employee education by establishing goals and objectives that can be implemented and measured.  Feedback is typically very positive after the implementation of a well-directed, focused educational program for employees.  Many participants claim to feel more confident in making sound and informed decisions. 

A clearly articulated strategic education plan focuses important resources to optimize budgets and time. Policy statements help plan sponsors and fiduciaries define and document their ongoing efforts in designating resources to help participants understand their choices.  An added benefit for plan sponsors and fiduciaries is that the policy helps document a prudent process.

A well-developed policy identifies goals and highlights responsibilities for implementing, deploying, and measuring results.  Accountability increases the co-operation among different groups involved in providing education to meet the established goals.   

Features of an Education Policy Statement

A policy sets the overall direction of the program and establishes procedures for ongoing education, feedback and communications.  It addresses the overall objectives of the education program, establishes the plan sponsor’s philosophical approach and mission statement.  The purpose of the Education Policy should be to retain employees and enhance their loyalty by offering ongoing investment education.

The policy should define roles, responsibilities, and accountability for the program’s success.  Often this includes the plan sponsor, plan fiduciary advisor, recordkeeper, and education service provider. The roles and responsibilities throughout the planning process, implementation and monitoring the effectiveness of the education program should be outlined.

The due diligence process for the selection of third-party service providers can be identified as well as criteria for the selection of education service providers, potential conflicts of interest, and monitoring their effectiveness.  Criteria for education service providers should be set for the selection, evaluation and ongoing monitoring of educational results.

Setting metrics and milestones provide prudent guidance. The use of participant data and plan metrics can be used to monitor and evaluate success.  Timelines for measuring results, frequency and other general types of metrics can be valuable tools.

Conclusion

A financially educated workforce is another tool plan sponsors can use to encourage and cultivate success for both their retirement plan and their plan participants.  A structured and well-articulated education plan, documented by an Education Policy Statement, can serve to provide fiduciary protection, improve participant loyalty and foster successful savings habits.

Implement an Education Strategy

Nicholas Zaiko, CIMA®

Investment Consultant

Bridgebay Financial, Inc.

www.bridgebay.com

The best way to implement an effective education strategy is to create an Education Policy Statement that establishes an overriding framework for deploying and measuring the effectiveness of participant communications.  The process of formally documenting the strategy in a policy statement helps ensure that the program will be focused, effective, and quantifiable. 

By establishing specific goals in the policy, educational campaigns can be more easily assessed and positive results measured against identified criteria.  The process of creating the policy turns nebulous notions of improving participant financial literacy into specific, discrete goals that can be used to guide the educational efforts of the program.

An Education Strategy guides the development of ongoing participant communications and education.  The strategy focuses on specific demographics or employee segments that need targeted education and messaging.  The strategy should identify specific types of desired results and include a calendar for delivering the education, milestones and how the program’s success will be measured.

Getting Started

An Education Strategy can document the objectives of the education program, content of the educational meetings, webinars, seminars, topics to be covered, and feedback or survey results.  There are several plan statistics that can be helpful in identifying areas for improved participant communications which include participation rates, average deferral rates, asset allocation among funds, and average participant balances.  All of this data can be provided by the recordkeeper and sliced by age, income group or geographic location.   Different savings patterns can be further evaluated by employee salary levels, divisional location, experience level and age.  These statistics, supplemented with employee surveys, can be utilized to identify certain populations of employees that face similar challenges in retirement plan savings. 

Once some of the challenges have been recognized, relevant goals, objectives, action plans and an education program can be developed to achieve stated goals. 

Employee Surveys

A well designed employee questionnaire or survey can be instrumental in identifying misconceptions about the retirement plan, employee benefits and areas of interest to employees.  The results of this survey may highlight areas for increased participant communication and educational needs. 

Plan sponsors can also benefit from industry data available through the recordkeeper and plan advisor that compares the plan to peer groups with similar workforces.  These industry surveys and benchmarking studies can be helpful in designing the plan and the communications program to enhance participant satisfaction and employee retention.

Setting Goals

Different measures of success can be used to establish specific goals.  Some typical milestones include increasing participation levels among a specific demographic, growing balances among certain salary levels, increasing contributions for participants stuck at a low percentage, broadening overall savings, improving asset allocation for participants in one undiversified fund, or improving personal returns.

Determining the Goals

The Education Strategy should focus on the issues or communications gaps that must be addressed.  Not participating in the retirement plan, inadequate deferral rates or excessive loan taking can all be areas for further education.  Employee groups to be targeted with specific educational topics can be prioritized in the annual education plan. 

The communications objectives should be stated to provide a clear message in the educational campaign.  Document the education campaigns to be delivered for the year by topic, targeted group, frequency, and delivery method.  Establishing an annual communications calendar that highlights the specific schedule for the various educational programs is critical for a well-orchestrated program that is measurable and repeatable. 

Finally, define the annual goals and objectives and how they will be evaluated and measured.  This is an opportunity to define the key metrics to be used to monitor the plan’s effectiveness and identify areas for modification. 

Means of Delivering Education Program

The methods by which the education will be delivered is an integral part of the strategy and planning process.  The use of in-person small group sessions, webinars, seminars, online tools, and participant feedback should be part of the annual plan.

The sequence of educational topics for the general audience as well as more targeted communications for specific employee demographics is important.  Certain topics may address the unique financial wellness and planning for women while other topics may be more relevant to young parents or recent graduates or new hires.  The topics should be segmented by stages in life and unique needs.

Topics to Be Presented

The education strategy should have a process for the review of all educational materials to be presented to the participants to screen for sales pitches or other services that would be a conflict of interest.  The annual plan should include a list of presentation materials that have been reviewed by the plan sponsor in advance for relevance and educational value. 

Measure Milestones and Education Success

Metrics for measuring the success of specific educational campaigns should be established in advance and should be used to evaluate the factors that contributed to the session’s success or help explain why the program missed the mark with participants.  Later sessions can be modified to absorb the feedback from participants.  By setting expectations in advance, results can be measured to determine the effectiveness of the program and set standards for future improvements. 

The effectiveness of a program can be measured by changes in participation rates, deferral rates, fund changes, or increased usage of service provider services following an educational program.  Follow up may also include a participant survey which can provide actionable information. 

Educational programs should be developmental and sequential.  They should target different participant groups by topic and interest.  Simply providing introductory and enrollment meetings does not educate participants nor do they gain financial literacy.  Educational plans should provide a foundation upon which to progressively build the participants’ knowledge of financial topics that are relevant to them.