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0604_MetLife CBR

Responsibility for Benefits Has Shifted


Over the last several years, companies have increasingly shifted the responsibility to their employees for choosing and financing more of their own benefits — such as health care, retirement and insurance-related products. Companies are turning to a mix of core, employer-paid benefits and an increasingly diverse portfolio of voluntary offerings, for which the employee pays all or most of the cost.


While employees’ appetite for employee benefits offered through the workplace continues to grow, their confidence in making the right decisions for themselves and/or their families is on the decline. Only 38% of employees say they understand what benefits options best meet their needs, down from 40% in 2004, and only one-third of employees are confident in their ability to make the right financial decisions for their family.


With a wider range of benefits and coverage options, comes an increased need for benefits education and advice. MetLife believes that one of the most effective delivery mechanisms for that education is in the workplace. Since most people get their healthcare, retirement and insurance coverage at work, employee benefits are an obvious starting point to determine what insurance coverage they need to protect themselves and their families today, and what protection they may need in the future.


Doing Away with a One-Size-Fits-Most Approach


Until now, most of the benefits information and advice employees have been getting does not always enable them to feel comfortable enough to make informed benefits decisions. As a result, employees spend very little time selecting their benefits during their company’s open benefits enrollment, often spending only 30 minutes or less each year. As a result, many employees undervalue the significant investment that their employer makes in their medical insurance and other employee benefits.


While apathy on the part of employees certainly plays a role in their low comfort level about making the “right” employee benefits decisions for themselves and their families, employers also need to shoulder some of the blame. For one thing, benefits communication and education has historically taken a “one-size-fits-most” approach. However, as a company’s workforce becomes increasingly multicultural and multi-generational — with Echo Boomers, GenXers and Boomers working side-by-side — an attempt to speak with an entire workforce with the same generic messages may result in the employer “getting through” to very few of their employees.


Retirement education is one area where targeted benefits education is imperative. A 25-year-old, for example, will need to learn the basics of investing, while a pre-retiree (someone within five years of retirement) may need information on converting his or her nest egg into guaranteed lifelong income in retirement.


Life Stage Matters


MetLife’s research demonstrates that employees have different savings and protection needs at critical phases of their lives. A life-stage approach gives employees a framework for making the best choices for each phase of their lives. Life-stage benefits recognize that as employees age and experience major milestones in their life their financial and protection needs also changes.


“Employees experience many trigger events throughout their careers, they require education and tools at each major life stage to ensure that the information they are receiving is pertinent to them,” notes Ben Colvin, vice president, Institutional Marketing at MetLife.


To increase employees’ understanding of — and appreciation for — their benefits program, employers need to prioritize their workers’ needs at each life stage and, then, tailor benefits communications and employee education materials to meet these diverse needs. Benefits plans — made available to a company’s entire workforce and then targeted to employees at various life stages — enable employers to help meet their employees’ expectations. They give employees the flexible choices they need and employers a cost-effective way to boost workplace satisfaction and loyalty.


“Steps can be taken to proactively remind employees about key trigger events — getting married, buying a home, having a child — which create a need to reevaluate insurance coverage and savings contributions. Open enrollment and benefits communication channels may also need to be customized based on life stage,” Colvin added.


Despite employee desire for planning and advice, many employers do not see education/advice as a top priority. When asked about their most important benefits objectives, employers listed “controlling health/welfare benefits costs” (53%) as their number one priority. Only 14% identified “helping employees make better benefits decisions” as critically important.


Not surprisingly, only 28% of employers believe that their benefits communications programs effectively educate employees about benefits choices. And, more than two-thirds (67%) of employers believe their workers don’t understand the value/cost of the insurance benefits that they provide.


That sentiment may be changing. Among the largest companies MetLife surveyed, nearly half (44%) are interested in working with their insurance carriers to target benefits communications to employees based on demographics and/or life stage.


Employee Benefits as a Recruiting/Retention Tool


MetLife’s research shows that when employees understand their insurance, savings and retirement needs, they make better benefits decisions and have higher levels of benefits and job satisfaction.


By using this information to customize benefits programs, companies can better satisfy the needs of their employees, while boosting their ongoing recruitment and retention efforts.


With nearly one-quarter of all employees changing jobs over the past eighteen months — and three in four businesses expecting competition for talent to escalate over the next 18 months — “recruiting” and “retention” have once again emerged as top concerns for employers. In this increasingly competitive job market, the study’s findings point to the increasing importance of employee benefits as a recruiting/retention tool — and the growing need for workplace education and advice.


Nearly one-third (31%) of employees cite benefits as an important reason why they came to work for their employer, up from 25% in 2004 and 2003. Pre-retirees (44%) and Young Families with children under the age of six (41%) in particular see benefits as an important criterion in their job search and selection.


Benefits Satisfaction on the Rise


Overall, benefits satisfaction among workers is on the rise, with 39% of employees reporting that they are somewhat or very satisfied with their benefits packages, up from 36% in 2004 and 32% in 2003. The study demonstrates a correlation between job satisfaction, employee loyalty and benefits satisfaction. Among employees who are very satisfied with their current benefits packages, nearly two-thirds are also satisfied with their current job — and two-thirds feel a strong sense of loyalty to their employer.


The Takeaway


Clearly, employees’ life stages play a significant role in how they perceive — and respond to — their benefits options. By using this information to customize benefits programs, wise companies can better satisfy the needs of their employees, while boosting their ongoing recruitment and retention efforts.


To get the new MetLife Study of Employee Benefits Trends, visit whymetlife.com/trends.

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Forecasts Differ On The Scope Of U.S. Offshoring

A pair of recent reports offer conflicting views of offshoring’s scale–and different lessons for how employers should plan their global workforces.


In the March/April edition of Foreign Affairs magazine, Princeton University economist Alan Blinder argues that service-sector jobs representing nearly a third of the U.S. labor market could be susceptible to offshoring in the future, with computer programming among the threatened occupations. A new study by the Association for Computing Machinery, meanwhile, suggests that the upper limit to offshoring is well below half that level over the next 15 years, and that there will be plenty of work for information technology professionals in the United States.


“Current data and economic theory suggest that despite offshoring, career opportunities in IT will remain strong in the countries where they have been strong in the past even as they grow in the countries that are targets of offshoring,” the professional group says.


Citing government data, the association says there were more than 3 million jobs in 11 IT occupations in May 2004, a figure that surpasses the number during the dot-com boom in 2000 and is up 3.8 percent from May 2003.


The association’s study, “Globalization and Offshoring of Software,” points toward a future in which companies will employ many skilled service-sector workers in the United States. Blinder, on the other hand, says organizations will be sending abroad much of their services work that isn’t “personal.”


“Constant improvements in technology and global communications virtually guarantee that the future will bring much more offshoring of ‘impersonal services’—that is, services that can be delivered electronically over long distances with little or no degradation in quality,” he writes.


In his article “Offshoring: The Next Industrial Revolution?” Blinder says jobs prone to offshoring do not fall into the traditional categories of high-skill versus low-skill. While taxi drivers and airline pilots both are buffered from overseas competition, typists and accountants are vulnerable, he argues.


Offshoring, which refers to sending work from higher-wage countries to lower-wage nations, has emerged as a major corporate strategy and hot-button political issue in recent years. Among the duties that have been sent overseas are transcription services, payroll tasks and call center work.


Despite their differences, the two new reports share some common ground. The association agrees with Blinder that higher-skill work, such as computing research, is being done abroad and that U.S. software professionals face more global competition.


Both reports also call attention to programs to help those who have been hurt by international trade. “The United States may have to repair and thicken the tattered safety net that supports workers who fall off the labor-market trapeze–improving programs ranging from unemployment insurance to job retraining, health insurance, pensions and right down to public assistance,” Blinder writes. “At present, the United States has one of the thinnest social safety nets in the industrialized world, and there seems to be little if any political force seeking to improve it. But this may change if a larger fraction of the population starts falling into the safety net more often.”


—Ed Frauenheim

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Five Questions for Cathryn Gabor

Cathryn Gabor, a 20-year human resources veteran, has worked at W.L. Gore & Associates and Capital One, both on Fortune’s list of the best companies to work for. In September, she joined AXA Equitable Life Insurance Co. as senior vice president of talent management and human resources. Gabor spoke to Workforce Management staff writer Jessica Marquez about how she plans to help the company, which has 6,500 employees, reach its goal of doubling revenue and tripling profit by 2012.

    Workforce Management: Your job entails employee relations, a new element to the position. Why did AXA make that part of your role?

    Cathryn Gabor: Often companies don’t consider employee relations to be part of talent management. We, like many organizations, have employment attorneys who handle the claims. But I am looking at how can I systematically (consider) all of the employee complaints and address a few key drivers around engagement, innovation and leadership. If we can address these imperatives, we won’t have as many complaints.

    WM: How are you going to help AXA reach its growth targets?

    Gabor: We want to be the most sought-out company to build a career. That’s not something that really sticks right now. To do this, I’m looking for the crème de la crème and tapping passive talent. These are not the people posting their résumés on Monster.com. They may not have thought about leaving their companies. They may not even be in the insurance business.

    WM: How do you go about getting those people?

    Gabor: I am dismantling AXA’s current practice of using the traditional methods–like job boards–to tap talent. Personally, I am spending at least one hour per week hitting the phones, tapping my network and getting referrals. We are also looking at sourcing differently. Most organizations use executive recruiters to do the sourcing and the vetting of applicants. I am looking to hire three sourcers to find talent and 14 recruiters to do the vetting in order to fill 1,200 jobs this year.

    WM: You worked at W.L. Gore, which is renowned for its culture. Are there aspects of its culture that you want to bring to AXA?

    Gabor: One thing that Gore does well is the art of storytelling and keeping the company alive through telling its history. AXA has a great history, and that is an opportunity for us to broaden our culture. I want to bring storytelling into every aspect of the HR process, from the communications to videoconferences and posters in the halls. My goal is to get all of our executives talking about the story of AXA.

    WM: What metrics will you use to gauge your success?

    Gabor: There are the standard retention metrics. I will also look at how we reduce the number of employee suits and claims, and if the number of dollars leaving us because of those claims is reduced. The biggest way I am measured, though, is through employee surveys.

Workforce Management, March 27, 2006, p. 18 — Subscribe Now!

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Suit Over Fiorina Severance Questions Pay Practices

Companies may now have yet another reason to make sure they are clear about how they pay their top executives. Four union pension funds have filed a lawsuit alleging that Hewlett-Packard breached its company policy to seek shareholder approval before authorizing the payment of severance benefits in excess of 2.99 times the sum of an executive’s annual base salary and target bonus.


The suit, which was brought by the Indiana Electrical Workers Pension Trust Fund and pension funds administered by the Service Employees International Union, claims that HP paid former CEO Carly Fiorina $21.4 million in severance, plus stock options and other benefits that increased her total compensation to $42 million.


Under the company’s 2.99-times rule, however, Fiorina shouldn’t have received more than $15 million, says Michael Barry, a partner at Grant & Eisenhofer, the New York law firm that field the suit.


“What it looks like is that Hewlett-Packard has been maintaining publicly that they are committing to limiting severance payments to 2.99 times annual salary and bonus, but when push comes to shove they feel that they can disregard it and characterize the payments as something else,” he says.


The suit was filed March 6 in U.S. District Court for the Northern District of California. HP spokesman Ryan Donovan says that the company believes the lawsuit to be without merit.


The suit highlights the very common disconnect between shareholders and management, says Ira Kay, global director of executive compensation at Watson Wyatt Worldwide. “The question is what does Hewlett-Packard say is severance and what do shareholders believe is severance,” he says. When stock options, pension benefits and cash incentives are involved, there is often confusion about what constitutes severance, he says.


Companies need to address this issue when explaining in their proxy statements how they pay their executives, consultants say. That may mean going beyond what the pending Securities and Exchange Commission rule will require. The rule, which is expected to take effect next year, will force companies to include a narrative explanation of how they pay their top executives. But Kay suggests that more might be necessary. Companies should include a tabular format that shows clearly the amount an executive will get under a certain set of circumstances, he says.


Added disclosure might help the situation, but the real issue is that shareholders are tired of companies paying executives for failing to perform, says Bruce Ellig, who was head of human resources at Pfizer for 25 years and is the author of The Complete Guide to Executive Compensation.


“This is a shot across the bow for all compensation committees,” he says.


Companies that don’t control what they pay their executives and who continue to stick to murky pay practices could find themselves keeping HP company in court, Ellig says.


—Jessica Marquez

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Sample New-hire Questionnaire

Now that you have joined our firm, you are in a unique position to further help us build a winning team. Please be frank and help us to:

  1. Understand what motivates and frustrates you so that we can help enable you to be more productive.
  2. Improve our recruiting processes and bring in more top talent.

PART I – UNDERSTANDING-YOU-BETTER QUESTIONNAIRE
Employees at our firm have a shared responsibility (along with their managers) to help ensure that every employee is as productive and motivated as possible. Because you are new to this position (firm), you can help us understand how to manage/motivate you so that you can do the best work of your life. Although this form is an important first step, it is imperative that you continue to help your manager and your team leader to understand what are your goals and how can we best help you reach them.

Why did you accept this job? (Please list in descending order of importance.)

1.

2.

3.

4.

5.


Even though you accepted our offer, what are your initial concerns about this new job? (Please list in descending order of importance.)

1.

2.

3.


Why did you quit your last job(s)? (So we can try to avoid similar issues.)

1.

2.

3.


What are the things that normally frustrate you on a job? What were the changeable aspects of your last two jobs that you liked the least? (Please list them in descending order of importance.)

1.

2.

3.

4.


What motivates you to do great work? Categories of motivators include rewards, recognition, challenge, making a difference, control, learning and growth, and open communications. (Please list them in descending order of importance.)

1.

2.

3.

4.

5.


How would you like to be managed?
Help us understand the most effective way to manage and communicate with you. Start by considering your past successful (and less successful) managers and then advise us on how best to manage, recognize and communicate with you:

Manage you

1.

2.


Recognize you

3.

4.


Communicate with you

5.

6.


Where would you like to be in your career in three years? (Please list in descending order of importance.)

1.

2.

3.

4.

5.


PART II – RECRUITING EFFECTIVENESS QUESTIONNAIRE
A) Improving the process
How did you learn about this job? What source or recruiting tool convinced you to apply?

1.

2.


Which part of the recruiting and hiring process worked best (impressed you)? Explain why for each:

1.

2.


Which part of the recruiting process needs improvement (made you uncomfortable)? Explain why for each:

1.

2.


Which part of the interview process needs improvement (Made you uncomfortable)? Explain why for each:

1.

2.


Which parts of our interview and offer process “sales pitch” were compelling and convincing?

1.

2.


Which parts of our interview and offer process “sales pitch” had no positive impact or actually turned you off?

1.

2.

3.


What were the final top three determining factors that convinced you to accept our offer?

1.

2.

3.


B) Other firms you considered
What other firms did you seriously consider? (Please list in descending order of your interest.)

1.

2.


What other firms made you offers? How did those offers differ from ours?

(Can we have a copy of your other offer letters?)

Firm

1.

2.


Superior elements of their offer

1.

2.


C) Will you help us identify others?
Who else should we recruit from your former firm? State their job and strengths (please list in descending order of their value as recruits.)

1.

2.

3.

4.

5.


Will you help us recruit them? (Put a Yes or No by each name)

What other employees “look good on the surface” at your former firm but wouldn’t be a fit here?

1.

2.

3.


D) Other
What are the best business and technical practices at your former firm? (Please list in descending order of importance.) (An optional question)

1.

2.

3.

4.


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Dear Workforce How Do I Address Flagging Motivation?

Dear Feeling Their Pain:

A department or business unit that has a morale problem has issues that are special and separate from the rest of the company. Most likely, the source of your morale problem may be a small group of employees, with an informal leader, who believe they are not receiving the recognition they deserve. Because the workplace also is a social environment, employees have the opportunity to share their discontent and compare their situations.
Determine whether feeling like “children of a lesser God” is the problem or is a symptom of a larger or different problem. Depending on the size of the group, this may be best determined by an employeesurvey or focus group. If self-esteem is truly the problem, then you must develop goals and plans of action to change the image of your business unit.
Whether self-esteem is the problem or symptom, you should address the social climate in your workplace. The grumbling of informal leaders and dissatisfied employees can be minimized with timely and meaningful communications from the senior management team.
Consider ways to make your business unit attractive to employees who wish to advance their careers, especially high-quality employees who could rise to management and leadership roles.
Use success stories of internal promotions to recruit new employees. Provide an opportunity for employees to participate in their career growth by focusing on what they are working toward, rather than what they don’t have.
Given the opportunity to consider other options, some of your employees will determine that the work they are performing in your business unit is their true passion. They will then become advocates for your business unit.
Meet individually with your employees two to four times a year to discuss their performance and the progress they are making on their goals. Consider conducting an annual off-site retreat with your staff to develop a strategic direction for your business unit and staff.
SOURCE: Lonnie Harvey Jr., SPHR, president ofthe Jesclon Group, Rock Hill, South Carolina
LEARN MORE: 12 Questions to Measure Employee Engagement.
The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

Ask a Question Dear Workforce Newsletter
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Workforce Management March 27, 2006

 
An Overhaul for Ford
By Irwin Speizer
There are few details so far on Ford’s ambitious workforce restructuring plan. But it’s clear that half-measures won’t do.
 
A Gray Future for Business
By Gina Ruiz
Researcher and author Ken Dychtwald says most companies just aren’t ready to adjust to their aging workforces. Now would be a good time to start.
The Last Word
Personalizing Motivation
Dr. John Sullivan on motivation
   In the Mail
Health care ‘propaganda’
Readers comment on health care issues
 
A Wake-up Call on Executive Pay
HP might be only the first of many companies called to account for what they’ve paid ousted CEOs. Volatile days for pension reform.  Crazy about the sane workplace. Data Bank: Legal Briefings: Overtime and harassment. Verbatim: Students decry labor rules in France. The Hot List: Prescription benefit managers. Data Bank: Why management matters. And more.
  
 
Staffing
Smarter about signing bonuses
The bonuses are back in a wide range of industries, and so are the problems they bring. Employers can minimize their downsides by taking a broader approach to retention. 		 
Recruitment
A commitment to colleges
Having a consistent presence on campus and being upfront with students can help firms steadily attract the best and the brightest.
 
HR Technology
A Federal rule’s silver lining
The OFCCP’s complex new Internet regulations are a headache, but ultimately could lead to better hiring and more efficient corporate staffing departments. 
 
 


March 13,  2006



February 27,  2006


February 13,  2006
If you’re not currently receiving Workforce Management magazine, click here to request a FREE trial issue today!

 

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Dear Workforce How Do We Ramp Up Hiring in a Suddenly Tight Labor Market

Dear Under Pressure:


Hiring 25 new IT workers is a very daunting task that is made even harder by an ever-tightening job market. Accomplishing this goal will require you to develop a sound recruiting plan. Here are some recommended steps:


Create accurate job profiles. Have your recruiting team meet individually with each of the hiring managers to develop a solid profile of the expected duties for each position. I liken this to building a house. Without a solid foundation to start, the house will collapse. Without solid job profiles, your recruiting team won’t be able to build a recruiting strategy, and may wind up chasing candidates that won’t fit the positions.


Determine the proper size of your recruiting team. You didn’t mention the number of recruiters you currently have, nor the level of the positions for which you are recruiting. If the positions are difficult to fill, I suspect that each recruiter could do three “fills” a month. If you need to supplement the size of your team, consider hiring contract recruiters or outsourcing this task.


Devise a sourcing plan. Decide on an Internet positing and sourcing plan using several national job boards. You also should consider using various search engines to find names to cold-call. Develop a list of target companies and instruct your recruiters to network with these firms. If you don’t already have one, an employee referral program is a great source of quality candidates.


Hammer out an interview plan. Do you have senior management’s buy-in that the hiring managers will commit the time necessary to interview? Managers generally do not like to conduct interviews. An interview-to-hire ratio of 3-to-1 is very good, meaning you will need to schedule at least 75 on-site interviews a month to meet your goal of 25 hires per month. Companies quickly run into “interview fatigue” when they work a schedule like that. This will be a major problem for your recruiting team if they have sourced the candidates but can’t schedule interviews.


Develop a bonus plan for your recruiters. I am not sure how your recruiters are compensated, but my recommendation would be to develop a bonus plan to drive your team to reach the hiring metrics needed to hit your target.


SOURCE: Mike Sweeny,T. Williams Consulting, Collegeville, Pennsylvania, April 26, 2001


LEARN MORE: How toreduce turnover in the IT department.


The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.


Ask a Question

Dear Workforce Newsletter

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Five Questions for Bobby Yazdani

Bobby Yazdani is a living example of the global forces he sees sweeping workforce management in America. Born in Iran under the shah, his family fled during the country’s revolution. Yazdani earned a math degree from the University of California at Berkeley, worked at Oracle for nearly a decade and launched his own software firm in 1997. Saba, based in Redwood Shores, California, sells software for tasks such as learning management, performance management and succession planning. Larger companies are buying these so-called talent management applications: Saba’s sales jumped 57 percent for the quarter ended November 30, to $16.2 million. Thanks to its recent acquisition of online learning and collaboration firm Centra in a deal worth about $60 million, Saba now has more than 500 employees and expects to reach annual revenue of $100 million. Yazdani recently spoke with Workforce Management staff writer Ed Frauenheim.

Workforce Management: What is fueling sales of talent management software?

Bobby Yazdani: If you talk about big organizations, like Caterpillar, the challenge they’re dealing with is, how can we better manage our people as we globalize? How do we have consistent approaches to people management? And the talent pool is not just American. At a lot of our clients, the HR executives are no longer American—they’re coming from foreign subsidiaries.

WM: Why the push for greater productivity and workforce “alignment” now?

Yazdani: Global competition plays a big role. At companies outside the United States, there is much more structure to training programs and investments in productivity. Also, I don’t see the size of the workforce increasing. The trend is not to throw more people at problems. It’s how do you grow and stretch with fewer people?

WM: Do you worry about the big guns, Oracle and SAP, as they ramp up their talent management products? Oracle argues “best-in-breed” vendors like you will be in trouble once its Fusion project comes to fruition and customers can buy an integrated package of HR applications.

Yazdani: We can coexist easily with other software. Seventy-five percent of our customers in North America run Oracle applications. The biggest customer of ours in Germany is the biggest SAP customer.

WM: What’s the significance of the Centra deal?

Yazdani: It’s a validation. They trusted us to take over. One-third of the purchase price was in cash; two-thirds was in our stock.

WM: Can there be an employee backlash against performance management products such as yours, which help companies keep much closer tabs on workers?

Yazdani: I think it does the exact opposite. It lets employees see opportunities. It gives employees visibility to see how they fit in. Say I’ve been asked to do a specific task. Why? How does it fit into the company’s overall strategy? The software also helps employees challenge the company or managers through feedback options. We see ourselves to be pushing on both sides of the equation. It’s a core belief that transparency and candor in an organization are powerful forces. I grew up in a country that didn’t tolerate candor. It was a dictatorship. I have seen the value firsthand.

Workforce Management, March 13, 2006, p. 9 — Subscribe Now!

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401(k) Industry Urged to Help Workers Save

In a rare public appearance, Abigail Johnson, president of Fidelity Investments’ Employer Services Co., has called for employers and financial services providers to take immediate action to address the growing retirement savings crisis.


“It will take years before our political leaders figure out how to reform health care and fix Social Security,” she said. “But there is a great deal that financial service providers and plan sponsors can do right now.” Johnson spoke last month at the East Coast Defined Contribution Conference in Palm Beach Gardens, Florida. The event was sponsored by Workforce Management and Pensions & Investments.


Johnson warned attendees that in the years 2020 to 2030, there is expected to be a $400 billion shortfall in retirement savings accounts. Johnson, who is expected to succeed her father, Fidelity CEO Edward Johnson, said the problem is that few employees participate in their 401(k) plans, and those who do often make poor choices. Citing Fidelity statistics, Johnson said that one-third of eligible employees do not participate in their 401(k) plans at all. One-fifth of participants don’t diversify and only invest in one investment option. Eighty-three percent do not seek out investment advice.


Johnson encouraged plan sponsors to automatically enroll employees into their 401(k) plans using lifecycle funds as the default. The funds reallocate money into more conservative investments as the investor ages. Companies also need to automatically increase the employee’s contribution to the plan on a periodic basis.


If employers do this, “inertia will work in (employees’) favor in most cases,” she said.


By automatically enrolling employees in a lifecycle fund, companies could help low-income workers increase their retirement savings by 29 percent, she said.


Johnson’s remarks are supported by the findings of a recent study by Schlomo Benartzi, associate professor at the Anderson School of Management at UCLA. Benartzi’s study found that counterproductive investing tendencies and inadequate 401(k) plan design are the two main reasons that employees do not participate in their retirement savings plans. The study was sponsored by AllianceBernstein Investment Management, a New York investment management firm.


According to that study, employees don’t know what to do when 401(k) plans offer too many choices. As a result, they often invest in conservative mutual fund options, which won’t get them where they need to be to retire, the study says.


For every 10 funds added to the plan, there is a 5.4 percentage point increase in the allocation to money market and bond funds. In addition, there is a 1.7 percent increase in the probability that participants will allocate more than 50 percent of their contributions to money market funds.


And, as Fidelity also found, once employees choose investments for their plans, they fail to reallocate as they grow older. The study finds that 401(k) plan participants are more likely than not to leave their retirement plan accounts unchanged over a 10-year period.


In an interview with Workforce Management following her presentation, Johnson emphasized the need to address low-income workers’ needs, since they seem to be the ones who are most at risk of not having enough money for retirement. Managed accounts, while often a good solution for some 401(k) participants, may not make sense for this group because they are expensive, she said.


Creating more well-rounded advice programs to help employees save for both living and medical expenses in retirement is also a crucial task for employers, she said. “This issue is particularly urgent for lower-income workers,” she said. Online advice tools may be sufficient for some employees, but companies need to think about advice that will reach all workers, she said.


Johnson’s speech hit home for Ray Oquendo, director of investment operations at Lucent Technologies, a Murray Hill, New Jersey, provider of communications technology. With 30,000 employees and more than 100,000 retirees, the topic of how to raise participation is “a constant conversation,” at his company, he says. To address the issue, Lucent recently teamed up with Palo Alto, California-based Financial Engines to offer online advice to employees.


Jeff Maggioncalda, president and CEO of Financial Engines, says that Johnson’s speech was a watershed moment for defined-contribution programs.


“Her call to action represents the end of the chapter predicated on the assumption that we can create a generation of do-it-yourself investors,” he says.


—Jessica Marquez