Getting personal

The ratio has hardly budged for the better part of a decade: On average only about two thirds of eligible employees participate in their companies' 401(k)s. Naturally, 401(k) providers yearn to improve that rate and keep dreaming up ways to woo new participants.

The latest effort: Plan providers are developing personalized communications aimed at individual employees. This customization is a departure from the one-size-fits-all brochures and information packets providers have traditionally sent out. Providers are constructing specific employee profiles, based on salary, age, contribution rates and account balances, that enable them to fine-tune such messages. In some cases, providers have also collected information about risk tolerances and retirement goals, which can then be woven into a personally crafted appeal.

"When you can talk in terms of a person's paycheck and assets, the message is much more meaningful," says Carol Waddell, director of product development at T. Rowe Price Associates: "We can show each person that it doesn't cost much to build a nice retirement account."

401 (k)计划由t . Rowe Price,佤邦说ddell, a participant contributing less than the amount matched by his or her employer receives a letter that clearly illustrates the benefit of increasing employee contributions to earn the full match. If that doesn't work, she continues, "their quarterly statement or transaction confirmation includes a note that says something like, 'You're passing up free money by not saving the maximum.'" The same message pops up on the screen of a call center representative when the employee phones in.

At Prudential Retirement, explains Deanna Miller, vice president of strategy and planning, personalized messages are concise. "They make just one point at a time," Miller says. With nonparticipants, for example, "the idea is not to convince them to defer at the maximum rate or pick the best investments," she says. "It's targeted to get them in. It says, 'Mary, if you would save at X percent, here's the impact on your take-home pay, here's the match you would receive, and here are the assets you would accumulate.'"

A pointed communication to a current participant might urge the worker to raise his or her salary deferral rate, or it might highlight the prospect of better returns through a more aggressive asset allocation.

Fidelity's personalized guides typically yield a 15 percent enrollment rate, compared with just 5 percent generated by its typical mass mailing campaigns. The old-style guides usually address all employees with one brochure, which shows three or four hypothetical approaches based on age, salary and investment preferences.

The personalized guides have increased the amount of employee salary deferrals as well, reports Stephen Deschenes, executive vice president of marketing at Fidelity Institutional Retirement Services Co. "In one case," he notes, "deferrals for a group we targeted at one company went from 5.4 percent before the communication to 9.6 percent."

More broadly, Fidelity studied 245 plans deploying personalized communications and annual account checkups and found that average deferral rates for the year ended September 1, 2004, were double those of plans with traditional messaging.

Last January, when J.P. Morgan Retirement Plan Services took over the 401(k) of St. Jude Medical, a medical device maker based in St. Paul, Minnesota, a targeted communication produced a 3-percentage-point increase in participation, from 73 percent to 76 percent, and a significant shift in asset allocation. "The biggest change for us was the increased diversification across our funds," says Jim Bishop, St. Jude's director of compensation and benefits. "About 20 percent of the assets in our stable value fund were reallocated to our three asset allocation fund options."

Providers report that about half of their sponsor clients have embraced the customized programs. Some employers, however, remain wary of sharing personal information about their employees with plan providers.