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Successful 401k Education Programs – Does Yours Measure Up?

March 02
00:01 2012

(This article is part of a series of articles addressing education for 401k participants and trustees.)

There’s only one thing worse than all the infamous misconceptions on the part of the investing public and 401k plan sponsors putting 401k education success behind the eight ball. That’s poorly executed 401k education programs. It’s true 401k plan 244004_6097_eight_ball_stock_xchng_royalty_free_300sponsors have a fiduciary duty to give the beneficiaries of the plan the best chance for success. And it’s true a good 401k education program goes a long way towards encouraging investors to attain that success. But is it fair to expect 401k plan sponsors – who are often neither investment experts nor education experts – to know the difference between a good 401k education program and a bad one?

With this in mind, asked industry experts to share their experiences in the ugly, bad and good of 401k education programs. What they reveal may hit too close to home for some, surprise others and downright embarrass many. They found some popular techniques habitually fail to lead employees down the primrose path. Do any of these stories sound familiar to you?

What’s an example of an improper method of education? “Doing nothing,” says Duane Thompson, Senior Policy Analyst, fi360 in Pittsburg, Pennsylvania. “The state of financial literacy today is so low that almost anything helps.  Of course, plan sponsors should aspire to more than that,” adds Thompson.

Courtenay Shipley, President of Shipley Capital Advisory, in Nashville, Tennessee describes an improper method of education as “passing out enrollment booklets and expecting folks to read the material and fill out the forms.” She says, “We live in a world that pulls us in every direction and demands we carve out time for everything we do. Let’s be realistic – that enrollment booklet will end up in a pile on the kitchen table never to be revisited again!”

Some symptoms of less than satisfactory means of education include “those delivered on the internet only, those taught at too high or too low of a level, those presented less than once a year, and those only focusing on investments and not tying it into personal goal achievement,” says Steven Kaye, President of American Economic Planning Group, Inc. in Warren, New Jersey.

General education can only achieve so much. Chuck Miller, a consultant in financial services communications from Chicago, echoes Kaye’s comments when he says, “The lack of information severely limits any onsite investment advice program. A personal advisor will have substantially more information about a family’s circumstances and finances.”

Dennis Ackley, President of Ackley Associates in Lees Summit, Missouri believes many 401k education programs fail because “they don’t incorporate adult learning theory and techniques into their education program for adults.” He believes retirement education is adult education. “Google ‘adult education techniques and principles’ and see how many of the key things mentioned are evident in your retirement education.” He says, “You probably won’t find many. That’s just one reason retirement education isn’t working well.”

Sometimes, though, plan sponsors needs to have an education plan fail in order to find out what can lead to success. Shipley tells us this story. “An advertising firm client was failing testing and was concerned about employees not taking advantage of the plan and the match. After some investigating and surveys, the underlying issue was their creative people were being given materials that appealed more to left-brained, data/numbers-oriented, linear thinkers. As a result, there was general feeling it was boring and too hard to understand.” Shipley explains, to improve the process, the firm “shortened the length of group meetings, used different materials that incorporated less industry-jargon while featuring more pictures and covered big-picture concepts. One-on-one meetings followed these group meetings in order to help employees apply concepts to their individual situation. The result: an increase from 64 to 90% in participation and the following year no refunds had to be given.”

Kaye concurs with the idea of one-on-one meetings and views this solution as the best example of a successful method of education. He lauds companies who commit themselves to “providing participants who are too bashful to ask questions in public – or want to bring in a spouse – to free counseling by professionals who act as fiduciaries.”

Ackley says “the single most important element of learning is a motivated learner.” He says the key to a successful education program “is to make beginning 401k education simple enough for the students to explain what they learned. If they cannot explain it, they didn’t learn it.” He contends 401k education programs should be created “for the beginners, not for financial pros – they don’t come to the 401k meetings anyway.”

Alas, no two 401k plans are alike so it’s impossible to say there’s one best formula for success in designing a 401k education program. A better fix is to define how one should measure success, but even this can be tricky. “A 401k plan sponsor can’t really measure retirement readiness since the plan doesn’t have access to much of the information required to make a reasonable evaluation,” says Miller. “There’s a whole lot more to gauging income in retirement than a future 401k balance,” he adds. Still, Miller trusts a form of success measurement does exist. He says “since savings is the primary goal of your education program, an increasing level of contributions would be the key metric.”

Shipley is willing to consider other criteria. “Success is measured by the results of the program or campaign, with the desired outcome planned in advance,” she says. Shipley indicates this can include something soft like HR receives fewer visits regarding 401k questions, or something more solid like an increase in participation or more appropriate investments.  Kaye includes participation, level of contribution and investment mix to his list. He also measures success simply “by how many show up for the meetings.”

Because he doesn’t feel a universal definition of good retirement education exists, Ackley puts the onus of measurement on the teacher. He says “plan sponsors must ask the provider, ‘When you’re delivering great education, what will our employees know…and how will you measure that for us?’”

Which leads us to our last question: What is the best way to deliver education programs?

In terms of the teacher, “for a 401k education program to be truly beneficial to plan participants, I believe that the program must be presented by a truly independent and objective adviser,” says James Watkins, III, CEO/Managing Member at InvestSense, LLC in Atlanta, Georgia.

In terms of media, Lana Burkhardt, President at Lana Burkhardt & Associates in Harrisburg, Pennsylvania says, “My experience with building 401k plan participant programs is that the delivery of in-person, webcast or video are much more impactful than sending printed educational materials. Individuals tend to access and learn from these forms of educational materials and respond with higher participation levels in their programs.” Kaye adds that any in-person presentation should be supplemented with web/cell access as well and include workbooks.

In the end, the delivery mechanism of a 401k education program is really a communications strategy. Shipley says this communications strategy “needs to target how employees learn: visual, aural, kinesthetic, pictorial, interactive, in a group, on their own, etc…” She adds developing an associated set of analytics to determine what motivated whom to action should be included in this strategy.

Whatever strategy is ultimately selected, “the method of deliver should not be determined by cost,” says Ackley. “Rather, the deliver method should be selected by its effectiveness in creating knowledge 401k operators. If it takes employee meetings, that’s what you must do. If you find an effective website, that’s great.” For Ackley, plan sponsors should whatever works for them and their employees.

Perhaps it is most instructive to end where we began by circling back to educating the folks most responsible for providing a successful 401k education program – the 401k plan sponsor. We’ll leave Bert Carmody, Investment Consultant at MillenniuM Investment and Retirement Advisors, LLC in Atlanta, with the final word. He says “Fiduciary education for plan sponsor/fiduciaries remains a work in progress. Having conducted numerous plan sponsor fiduciary educational sessions, it is a balance between informing on fiduciary obligations, new/existing regulations and not scaring them into terminating the plan. The real challange is trying to change fiduciary behavior and sometimes little steps have to be made to convince plan fiduciaries the mission is credible, they can accomplish it and the benefits outweigh the costs.”

Of course, even a lengthy series like this can’t cover all areas that should concern a 401k fiduciary with the depth and reach required to be truly helpful. Only a book can do that. If you’re interested in the book (tentatively titled Fiduciary Solutions – The Best Opportunity for 401k Plan Sponsors to monitor plan compliance, plan investments and share the fiduciary burden with experienced professionals), e-mail us at and we’ll e-mail you back sometime this April when the book is published.

Part I: The 4 Critical Elements of a Successful 401k Plan Education Program
Part II: The Primary Objective of a Successful 401k Education Program
Part III: The Most Compelling Challenges in 401k Education
Part IV: Successful 401k Education Programs – Does Yours Measure up?

About Author

Christopher Carosa, CTFA

Christopher Carosa, CTFA


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