Would You Give an “A” to Your Financial Education Program?

New Year’s is a time to set goals and begin working toward achieving them. Employers that sponsor 401(k) and 403(b) plans can help employees improve their ability to enjoy a secure retirement by communicating with them about financial issues during this time of the year as one part of an effective year-long education program.

Regular communications is an important feature of a financial education program deserving an "A" grade. Consider what other features you should offer so your program ranks "at the head of the class."

Two additional features that immediately come to mind include helping employees identify how much they should save to meet their needs in retirement and providing education on issues critical to their current and future financial health.

But how do you put together an effective financial education program and how do you deliver it? Here is where the assistance of a good retirement plan advisor can make a difference. (In my previous blog, I suggested one of the criteria a plan sponsor should evaluate in selecting a retirement plan advisor is the degree to which he or she will help the plan sponsor in providing education to plan participants.)

Your retirement plan advisor should help you in assembling the parts of your financial education program. It should include access for participants to broad financial education because making wise financial decisions today will help your employees better prepare for retirement. Your advisor can help you select a plan recordkeeper with a participant website that includes tools to help employees evaluate whether they are saving adequately. Importantly, a good education program should include regular access for participants to your advisor, who will answer questions raised by the financial education, help them use retirement-planning tools on the recordkeeping website, and provide guidance to assist participants select the 401(k) or 403(b) investment options that best fit their goals and life situation.

When I suggest “broad financial education,” what does that mean? It’s fortunate that many plans have moved beyond education focused solely on how financial markets work and how participants should construct an investment portfolio. While this information can still be a part of a financial education program, today’s education should address financial basics, including basic budgeting strategies, the high cost of credit card debt and an introduction to various types of insurance. Your employees will benefit from learning ways to save for their children’s college. Other topics that help participants plan for retirement can include instruction on how to calculate retirement needs, facts on Social Security, estate planning facts, and preparing for long-term care.

(Yesterday’s education focused on constructing an optimum retirement portfolio also becomes less crucial as most plans offer some sort of diversified investment option, whether it is managed model portfolios, which allow participants to choose an investment that fits their diverse individual characteristics, or the one-size-fits-all target date funds.)

There are a variety of ways broad financial education can be provided. It’s important when there’s a change to your plan – or your advisor – that you hold an enrollment meeting that emphasizes the importance of retirement savings and explains how to calculate what will be needed for a secure retirement. The enrollment meeting can be provided on-site or through webinars if employees are at multiple locations. Ask your advisor about recording the enrollment meeting so that employees can re-view it or it is available to new hires. Educational programming also can be provided through webinars and recordings.

In my introductory paragraph, I suggested communicating with employees in January . . . and then throughout the year. What should such communications include? It’s always important to encourage savings and remind employees of the educational resources that are part of your plan. Remind employees of the retirement calculators and describe how they can be used. Provide links to the educational materials. Importantly, encourage them to call your plan’s advisor to discuss their plan investments and questions they have about preparing for retirement.

Much has been written about the increasing responsibility employers are taking to ensure their employees are knowledgeable and well-prepared for retirement. Simple communications throughout the year to employees and careful thought to assemble an effective financial education program can improve the ability of your employees to enjoy a secure retirement and earn your plan’s efforts an “A” grade.

So . . . how would you grade yourself today? Please call me if I can answer questions or help you improve your company’s financial education program so that it is among those recognized for excellence.


This blog is written to help make the lives of plan sponsors easier in the process of meeting legal requirements under ERISA and providing employees with a better defined contribution retirement plan. Please understand that reading this blog should not alone take the place of a one-on-one consultation regarding the needs of your specific plan, and cannot be a guarantee against fiduciary breaches.

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