Investing for retirement

This spring, Cook County, Ill., reduced the number of investment options available to employees through its deferred compensation plan to scale it down and make it easier for employees to participate. To ensure a smooth transition to the revised plan, the county launched an education campaign that aimed to explain the reasons for the changes. The outreach also recruited more employees to contribute to the plan.

For several years, the county has offered employees a plan in which employees can elect to defer a portion of their paychecks before taxes and invest that money in a variety of mutual funds. Last fall, the county decided to reduce the number of fund choices because multiple investment options were offered within some asset classes, which could confuse employees when selecting investments. At the time, the plan offered 35 fund investment options. In fall 2003, the county’s plan provider, Columbus, Ohio-based Nationwide Retirement Solutions, helped review under-performing, extraneous or costly funds and recommended closing 11, including the Fidelity Magellan Fund, which was a popular choice among county employees.

The county’s deferred compensation committee became concerned that such a large change would cause disruption for many participants, so it adopted the changes but called for a large education effort to make sure employees understood them. The committee wanted the 13,000 employees that were actively contributing to the plan to have enough time and information to choose different investment options.

To help educate its employees, the county and the plan provider developed a multi-media campaign about the upcoming changes. Two weeks of workshops were planned in which employees could visit with consultants to learn more about preparing for retirement and the plan changes. All employees received notices about the workshops in their paychecks, and posters were hung throughout county buildings. Employees who had money invested in funds that would be closed were sent notices and prospectuses for comparable funds.

For the first two weeks in May, daily workshops were held at 12 county office buildings to explain the investment options and answer employees’ questions. Employees received worksheets to help them decide which investments could best meet their retirement goals.

As a result of the campaign, the county enrolled 219 new employees in the retirement plan, which increased the participation rate by approximately 1.5 percent. Additionally, 328 people increased the amount of money they were contributing to their accounts. Nearly 400 employees chose to move money from one fund to another, whether it was closing or not. Adding the new accounts and the increased contributions, county employees will be saving $1.25 million more annually for their retirement, bringing the county’s plan total to $575 million.

The Lexington, Ky.-based National Association of Government Defined Contribution Administrators presented Cook County with a Leadership Recognition Award in September for its financial education fair. The awards are presented annually to recognize outstanding achievements in effective communication or plan design and administration in defined contribution/deferred compensation.