Participant Education by Ed Dressel President of Trust Builders and TRAK

1. Meaningful 401(k) Participant Education
For most 401(k) advisors and plan fiduciaries, the
phrase “401(k) participant education” evokes
feelings of sitting in a dentist’s chair (“I really don’t
want to be here!”) and taking a required biology
class in college (“How is this relevant?”). Even the
most cooperative 401(k) advisor has trouble
conjuring a positive attitude toward participant
education, and pessimistic thoughts abound: What
good has ever come of participant education? How
can these sessions succeed? Education just doesn’t
work.
A quick search for “401(k) participant education” in
Google yields a host of articles with tips for advisors
hoping to improve education. Unfortunately, few (if
any) specific steps have a proven track record.
Much of the advice found in the articles lacks
actionable details. “Drive employment participation
in the plan.” (But this is an effect, not a cause.)
“‘Doing nothing’ is an improper method of
education.” (But what if “something” leaves the
participant more confused than “nothing”?) “Use
clear language.” (To clearly tell them what?) “Hold
mandatory meetings.” (Do I even need to comment
on this one?) Without specific recommendations to
follow, advisors are left on their own to establish
the format of participant education meetings.
What Participant Education Is Not
Before discussing what education should be, we
should first talk about what education is not—it is
not about the advisor. The education process
should never be about how much the advisor knows
about 401(k) plans and retirement planning.
This may seem obvious, but it can easily become a
crutch for an advisor who is unsure of how to move
the process forward. Uncertain about the next
steps, the advisor fills the time with an oration of
his or her knowledge of 401(k) plans. Of course, this
is more appropriate for an employment interview
than for a participant meeting. This approach
quickly disengages the participants, as the meeting
emphasizes the advisor’s knowledge. This approach
does not demonstrate concern for the participants’
needs. If the advisor’s knowledge is the focus of the
meeting, it would be better to “do nothing” (to the
chagrin of some).
What Participant Education Should Be
So what should be the focus of participant
education? First, the educational goals must be
identified. Should the education help participants
understand the vocabulary that advisors are using?
Should it help them understand their investments?
Should it help participants better understand the
fees associated with their investments? And if
those are the goals, what would the end result be?
Should participants be able to define the words an

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advisor believes they should know? Should
participants be able to articulate an investment
strategy? Will this result in higher deferrals?
Specific goals will provide specific direction.
Education must focus on the participant. This seems
obvious, but it is rarely heeded by advisors. An
advisor has vast knowledge that participants simply
don’t care about. (Participants want to know that
their advisor knows it, but don’t necessarily want to
know it themselves.) To present much of that
information to participants without a specific
purpose could alienate the audience.
A few years ago, Brian Heckert, an advisor based in
southern Illinois, acquired a new plan sponsor. He
asked the plan sponsor to pass around a signup
sheet for employees to meet with him when he was
on site, but no one signed up. Why? Because they
had met with a previous advisor and the
information they had received was not meaningful
to them. It did not engage them. (Again, “doing
nothing” might have been better!) Whatever their
prior education process had included, it was not
helpful. It alienated them from the process and
immobilized them from making decisions. The
education was not focused on the participants.
Education must be meaningful to the participants. If
they don’t find it meaningful, they won’t engage in
the process. There is nothing more damaging to
participants than to set up a meeting (group or
individual, mandatory or elective) and provide
information that they cannot connect to, are not
interested in, and do not want to return to. A
meeting like this will merely dishearten participants
who should be engaged in a process that has
significant consequences for their future.
To understand how participants perceive non-
meaningful information, consider what “asset
allocation” means to a group of participants with
low participation levels. Asset allocation is an
important part of a retirement plan, but is it really
meaningful from the participants’ perspective? Will
it really engage the participants? If someone is
contributing $5 a month, should asset allocation be
the focus of education? (If you answered “yes” to
any of these questions, please re-read the previous
paragraph.) Asset allocation should not be the
starting point for educating participants who have
little involvement in their plan, because the concept
is not meaningful to them.
Meaningful education engages groups and
individuals about their retirement. When presented
with meaningful education, participants become
engaged and lean forward during a meeting.
Meaningful education has an immediate impact.
Participants want to ask questions. Some want to
clarify their own situation.
TRAK in Action
Mr. Heckert saw this firsthand when he asked the
plan sponsor to schedule a mandatory meeting in
which he discussed two items. First, he talked about
how expensive credit card debt is (a topic that is
meaningful to many Americans). Then, using The
Retirement Analysis Kit (TRAK) Paycheck Analysis
calculator, he illustrated a sample paycheck,
indicating that he could do this for each individual
in the group. He showed how he could focus on
their take-home pay (instead of an abstract
contribution percentage to a 401(k) plan) and easily
project the future account balance. The participants
leaned forward.
The Mr. Heckert showed the participants the effects
of postponing the increase in contribution. Finally,
he asked who would like to have a one-on-one
meeting with him. This time, every person in the
room signed up for a meeting. Why? Because the
education Mr. Heckert was providing was
meaningful and engaging.
For education to be meaningful, it must start with
what the participants understand. This allows them
to connect to the new information. Meaningful
education is participant-centered, because it starts
with their current understanding (not with the

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advisor’s more extensive understanding). If
participants cannot connect to what is being said,
they will not absorb it and they will not learn. That
is why education must begin where the participants
are engaged in the significance of their decisions.
The advisor needs to stay focused at the level the
participant finds meaningful.
Consider the participants’ simplest decision:
selecting the percentage for 401(k) contributions.
What does it mean for participants to increase their
contribution from 3% to 5%? Obviously, any
increase means less take-home pay, but how much?
And an increase may mean receiving a greater
employer contribution, but how much greater? The
increase also means more savings at retirement,
but how much? And what difference will it make if
participants wait a year before deciding to increase
their contribution? These are the participants’ key
questions. Receiving answers to those questions
will help them understand the effects of their
retirement savings and how their decisions impact
their situation. This type of education is relevant
and meaningful.
Ultimately, meaningful participant education must
provide opportunities for participants to make a
decision based on what they have learned. It does
not leave them in a fog, but rather explains the
importance of their decisions in terms they
understand. Meaningful education helps the
participants understand why they need to make a
decision and conveys a sense of urgency.
Participant Education with Paycheck Analysis
Paycheck analysis software can help advisors
provide this type of meaningful education to
participants. It can illustrate a client’s current
paycheck. (This is focused on the participant!) It can
show them how increases in deferrals affect their
take-home pay. (This is meaningful to the
participant!). It can show them how the deposits
accumulate until retirement. (This engages the
participant!) And it shows them the cost of waiting
before making a decision. (This presents the
opportunity to make a decision today!)

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TRAK provides paycheck analysis software to help
advisors education groups and individuals on all
these topics and more.
Group Participant Education
TRAK’s Batch Gap report is designed for advisors
working with groups. After importing census data,
the advisor can create a Batch Gap report easily for
each individual in the group. The report illustrates
the client’s current paycheck, which helps the
participant connect to the education process.
Additionally, the report illustrates the participant’s
retirement shortfall and the impact on take-home
pay of funding the shortfall. This provides
immediate, relevant and actionable information to
the participant. The Batch Gap report engages the
participant and is a popular tool for advisors
offering group 401(k) participant education.
Individual Participant Education
TRAK’s Paycheck Analysis tool is effective and
efficient for one-on-one meetings with participants.
The tool can display the participant’s current
paycheck and help the participant connect to the
illustration. Similarly, the software can display a
modified paycheck by allowing the advisor to enter
the desired take-home pay, thereby generating a
backward calculation of the corresponding
contribution.
Optionally, TRAK can illustrate the effects of
reducing the participant’s federal 1040 refund and
automatically depositing it into the retirement plan,
illustrating the accumulation and distribution of the
new deposit. The tool also lets participants instantly
see the cost of waiting six months, a year, two
years, etc.
Like the Batch Gap report, TRAK’s Paycheck Analysis
calculator makes individualized participant
education meaningful.
Proven Results
Mr. Heckert’s participant education resulted in a
112% increase in deferrals and finding additional
retirement accounts participants may have. Other
advisors using TRAK tell similar stories. Principled
participant education meetings are both effective
and profitable.
Get TRAK Today!
Start making participant education meaningful!
Download a demo of The Retirement Analysis Kit
today, or call Trust Builders, Inc. at (503) 831-1111
to schedule a demo.