Educating Participants: Focusing the Lens By: Diana PowellESQ. 2013.11.07

“Tell me and I forget.  Teach me and I remember.  Involve me and I learn.” Benjamin Franklin

Recently the discussion by advisors and plan sponsors has focused on how to increase participation in 401k education programs.  This has been tied to a desire to make these 401k education programs the type of effective presentations that lead to smarter investors and employees more knowledgeable about their 401k accounts.  The goal is to make participants better prepared for retirement through the increased knowledge they gain by way of their company’s 401k education programs.

Compounding the problem of creating better 401k education programs for participants is convincing advisors and plan sponsors of the importance of the 401k education programs. (Carosa)  However, the relevance of providing a quality 401k education program to plan participants is highlighted when it is shown to be a part of their fiduciary duties.

The problem is that so far the majority of the 401k education programs in place have not been very effective, according to experts in the field.  Many experts agree that the existing education programs are sadly lacking.  The courses are uninspiring, uninformative and suffer from low attendance and low retention rates.  However, much has been written lately on this topic hoping to inspire change in the way 401k education programs are structured.  The major theme of the proposed reform to the education programs has been to find innovative ways to communicate the information to encourage plan participants to attend programs and to leave informed.

Educating participants about their 401k retirement accounts in an effective and meaningful way means that advisors and plan sponsors need to find ways to motivate themselves and the employees to both communicate and receive the complex information involved in investing in these accounts.  The first step was to recognize that the educational system in place has not been very effective.  The next step is to find innovative ways to correct the problem.  Starting the discussion is a positive step in the right direction. The key is to take the knowledge gained and then acting on it and investing in the 401k plan.  Plan participants will ultimately be the beneficiaries.

Winter Confero 2014 - Participant Education Vs. Advice
Diana K. Powell

Diana K. Powell, Esq. joined Westminster Consulting in September 2012 as Senior Legal Advisor. Previously she was a sole practitioner who advised educational organizations, government bodies and private corporations. Diana was responsible for negotiating agreements for high-tech software corporations...

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