Kasina Study Offers Road map for Asset Managers Seeking to Increase Participation Rates in DC Plans

NEW YORK, March 2, 2005 � In its new study �Driving Enrollment and Contribution in DC Plans,� financial services industry consulting firm kasina provides a road map for asset management firms seeking to increase plan enrollment and contribution rates, and to strengthen relationships with plan sponsors.

Defined Contribution (DC) plan providers face a major challenge. Unfortunately, most employees have no knowledge of or contact with the firm running their retirement plan. The result is under-performing plan enrollment and contribution rates, which present a huge opportunity to improve plan services.

�While two-thirds of plan sponsors rate enrollment and contribution levels as the most important factor in determining the success of a plan, those rates remain well below optimal in most defined contribution (DC) plans,� said kasina�s Michael McLaughlin, one of the study�s principal authors. �This is a challenge for providers who recognize that higher enrollment and contribution rates fit directly with their own goals of increasing assets under management and effectively servicing sponsors and participants. This study is designed to give these firms a clear approach to getting the most out of plans for themselves, sponsors and employees.�

To produce its study of the DC marketplace, kasina surveyed 24 DC plan providers, and conducted extensive interviews with 8 top firms representing $2.1 trillion in assets under management. The firm�s research found that the typical plan provider often creates unnecessary hurdles to communicating with employees by failing to establish the proper initial relationship with sponsors. For example, while plan providers can benefit immensely by extracting participant demographic data from sponsors, few actually take the steps needed to get this information, according to the kasina report. The end result is that just 75 percent of eligible employees participate in the 401k plans sponsored by their companies, according to a recent study from Deloitte.

�While enrollment and contribution rates are not abysmal, they are still far from where they need to be. Access to and proper usage of basic participant information allows the plan provider to create messages targeted specifically to the individual,� said McLaughlin. �This in turn can help spur higher participation among a company�s employees.�

To illustrate, McLaughlin cites two data points: a change in an employee�s marital status, and an employee�s fiftieth birthday. In the first instance, getting married provides an excellent incentive to start or increase contributions to a savings program; in the second, turning 50 lets the individual take advantage of catch-up contributions and contribute more aggressively to the plan. Both of these can be the subject of highly personalized communications from the plan provider, according to McLaughlin. But the provider must first have access to the participant data and manage it appropriately in order to craft the message in the most timely and effective manner.

Best Practices

The kasina study examines best practices across the industry and recommends a four-step process for driving increased participation: 1) Partnering with the Sponsor; 2) Understanding Employee Needs; 3) Generating Communications; and, 4) Measuring Effectiveness. The firm describes the road to improved participation as a �closed-loop process that defines a framework for firms to continuously analyze and refine attempts to enhance employee enrollment and contribution levels.� Among the best practices kasina notes are:

  • identifying sponsor value as a first step to establishing a cost-effective service level;

  • integrating key personnel to facilitate the logistics of setting up and managing the plan;

  • promoting automatic enrollment;

  • promoting sponsor matching;

  • activating data flow to measure plan effectiveness

  • aggregating and analyzing employee data;

  • exploiting all available communications channels and personalizing content; and,

  • embedding tracking mechanisms within communications protocols to measure results.

�With 401k and other DC plans now playing an increasingly important role in retirement for many employees, it is critically important to both providers and sponsors that participation rates be as high as possible,� McLaughlin said �The plan providers that will be most successful in generating high levels of participation are those that lay the groundwork right at the start in terms of access to information and the terms of engagement for both client and participant relationships.�

About kasina

kasina is a management consulting firm that is focused on helping financial services companies create intelligent relationships with their investors and intermediaries. By combining knowledge of distribution trends, technological innovations, and marketing strategies, kasina aids leading asset management firms with front-office efforts and publishes a regular schedule of cutting-edge industry research. kasina�s client list includes 18 of the 20 largest asset managers in the United States and leading firms in Canada, France, Germany, and the United Kingdom. An overview of services offered by kasina is available at www.kasina.com.