When Jill Fratpietro, Adam Skube and their team took on a new client, a legal firm in Ottawa, to reorganize its group retirement benefits plan, they had no idea how transformational the process would be.
The client had allowed the plan to keep going, unchanged, for many years. Awareness of what it offered or how much it cost was low, and the participation rate was just 15 per cent. Communication around the plan was non-existent.
“It had not been reviewed in 20 years,” recalls Fratpietro, Partner at OneLife Benefits and Consulting in Ottawa. “They actually thought they had a defined benefit plan in place.”
OneLife was brought in to oversee the “clean-up” of what was in fact a defined contribution (DC) plan, a process that ended up being “quite extensive,” says Fratpietro. Over the better part of a year, OneLife conducted a thorough assessment, recommended how to restructure the plan to resonate more with employees and reduce the fees, and crafted a communication strategy that focused on value.
The story isn’t unique. Focused on managing benefits costs, employers often overlook their group retirement programs, says Fratpietro. That can lead to underutilization, as employees are unaware of the benefits of joining the plan, and a subsequent reduction in employee satisfaction and retention. Worse, a lack of communication around the plan can leave employers open to litigation.
Fratpietro recommends the following step-wise approach to put your best foot forward.
Don’t do it alone. Work with your benefits advisor or financial planner to take stock of what you have, state the goal of the plan and map out the key benefits to communicate to employees.
Fully assess what’s currently in place. Take stock of the plan’s design, the fees, the number of enrolled plan members, and how the plan was being communicated.
Summarize the findings. For their legal-firm client, Fratpietro, Skube and their team created an easy-to-read summary of the retirement program, including an explanation of how it worked. That gave the employer a clear snapshot of where they are now—and what they might need in the way of new investments.
Define the plan’s goal. If the plan was set up years ago, its goals may have dramatically changed, says Fratpietro. “The plan can be tailored to intent,” she says. This can mean adding more flexibility to the plan for younger plan members who want to withdraw funds, for example.
Make it personal. Provide each employee with a personalized summary of what they have in the plan, with instructions on how to augment contributions and detailed projections of the performance of funds in the plan. That may entail offering investment information about each fund to help employees select the fund or mix of funds that suit their needs, based on how close they are to retirement and risk tolerance. Fees should also be listed: under the Canadian Association of Pension Supervisory Authorities (CAPSA) Guidelines, plan sponsors are responsible for disclosing all fees paid by plan members.
Negotiate. With the guidance and expertise of their advisor, employers can use the plan’s aggregate plan assets to renegotiate group fees. They can also leverage other retirement plans to lower fees. For their client’s DC plan, “we found that the fees were double what they should have been,” says Fratpietro. Accordingly, fees were reduced by 50 per cent under the renegotiated plan.
Go high tech. One approach that successfully encouraged the legal firm’s plan-member employees to access information was a QR code that took them directly to the enrollment site for the plan. “It was a quicker way to register than filling in a form,” says Fratpietro.
Communicate, then communicate some more. Develop a focused communication strategy that reaches all audiences, advises Fratpietro, including one-page written summaries, in-person group presentations, in-person one-on-one meetings, emails and phone calls. For the legal firm, “we did three full days of one-on-one meetings with every single employee,” she says. “This was critical in helping the employees with changes, registration and understanding the value of the program.”
A financial planner was also present at these meetings to provide personalized financial advice. “This was a massive component of the communication strategy and its success,” states Fratpietro.
The process of reorganizing a retirement plan can be a powerful tool, making employees feel supported, recognized and less likely to leave, says Fratpietro. In the case of the legal firm, participation in the plan climbed to 90 per cent and the client was able to use the plan as part of efforts to retain staff in Ottawa’s competitive legal labour market. “They’re so grateful,” she says.