The crash of global financial markets in 2008 caused many employers to reassess their responsibility within group plans, according to many North American consultants and plan administrators. As a result, defined contribution (DC) plan sponsors in the U.S. and Canada have adopted a more robust approach to member communication in terms of both message and means of delivery.
Member interaction has also become more robust—for instance, addressing topics such as investment risk diversification and adequacy of contribution levels, rather than the more traditional messages aimed at encouraging plan participation. Industry consultants and plan administrators see this shift in member interaction as an evolution of the marketplace, influenced by the availability of new online communication technologies as well as regulatory changes in different jurisdictions.
Who’s online?
The internet and call centres have now become the main member communication vehicles in Canada and the U.S., the consultants observe—not only due to cost-effective delivery but also because electronic innovation has enabled new ways to stimulate interaction. As such, the vast majority of member websites hosted by Canadian and U.S. DC plan administrators now incorporate features such as real-time personal financial calculators and planners, all presented in user-friendly formats. Under the CAP Guidelines, Canadian sponsors have mainly stuck to providing plan information, albeit with a leaning toward “non-discretionary advice” (i.e., information relating to the performance of different investment funds but without individual recommendations on how to act).
Many of the member educational recommendations outlined in the CAP Guidelines were already being communicated by DC plan administrators, observes Anna del Balso, director of strategy and research, group savings and retirement, with Standard Life in Canada. But instead of doing so primarily through paper, the industry’s emphasis has shifted to integrated and customized communication through online and other electronic resources. “The main content—how much to contribute, what are the investment options and what to consider—remain the same. What we’ve invented are multi-media solutions integrating new tools and media with existing sources of information.”
Over a year ago, Standard Life launched a new DC plan member website called the VIP Room, which incorporates interactive features such as a personalized, customized retirement dashboard that enables users to review and calculate their contributions, account balances, asset allocation and projected retirement assets.
Much of the success of online member interaction depends on simplicity, she adds. “The key is to keep it simple if you want to keep members engaged…you make the information and options too complex with too many unknowns, and members stop interacting….Our aim is to educate members to have realistic retirement goals.”
Randy Colwell, regional vice-president, group retirement services, with Sun Life Financial, concurs that convenience and simplicity are crucial elements. Internet and call centre self-serve communication services are proving to be highly popular with plan members because of their convenience, he notes. And there does not appear to be an age barrier in internet utilization by plan members. For instance, a survey conducted by Sun Life of its online users in October 2008 showed that four times more plan members in the 50-plus age bracket visited the plan member services website than those in the 20-year age bracket.
Most recently, Desjardins Financial Security launched its On Target Retirement online financial planning simulator for members of group retirement plans. Like its counterparts, the simulator is an online solution combining the more traditional DC plan member communication tools, but it does not offer individual advice, says Karrina Dusablon, director, education centre, savings for groups and businesses, with Desjardins Financial Security.
The significant use of online tools as a communication vehicle in Canada and the U.S. largely has to do with broad integration and acceptance of the internet into the lifestyles of the population across the various age groups, notes Colwell. In contrast, communication of DC plans remains very paper-driven in the U.K., as there is a perception that the aging baby boomers set to retire are less receptive to use of the internet, observes Greg Thorley, national employee communications manager with Standard Life in the U.K.
The right advice
Different regulatory environments have also influenced the direction and development of member communication and retirement planning tools in Canada, the U.S. and the U.K., the consultants point out. For instance, the Safe Harbor provision under the Pension Protection Act (PPA) in the U.S. has instigated a dramatic swing toward DC plan sponsors providing personal advice versus pure education or plan information.
Member interaction in Canada will likely follow the U.S. in terms of providing more personalized advice on retirement planning, the consultants predict. But the move thus far has been slowed by plan sponsors’ concerns of litigation—against which the CAP Guidelines do not provide protection. “There is greater recognition [by plan sponsors] of the need for more personalized member advice; however, there is still a barrier [in Canada] in doing so, as there is no Safe Harbor protection,” says Rosalind Gilbert, a vice-president in Aon’s DC consulting practice in Vancouver.