Employer Support Doubles Retirement Plan Participation Among Public Employees

November 17, 2009

ICMA-RC Research Identifies Motivations and Obstacles to Saving

Research shows that city and state government employees are twice as likely to save for retirement when employers provide support, resources and education for doing so.

ICMA-RC recently partnered with MB&A Market Research to study the motivational behaviors that keep some public employees from saving for retirement. The most significant finding was the critical role employers serve in promoting retirement saving. The average participation rate in 457 plans, a type of retirement savings plan primarily for state and local government employees, was 54 percent when employers were highly supportive and actively involved versus 25 percent when employers were less engaged.

“Public sector employees at every level of income become more interested in saving for retirement when their employer takes an active role,“ said Keith Sendall, ICMA-RC Senior Vice President of Field Sales. “Nearly all public employees who are saving in 457 plans cited employer support as one of the main reasons why they enrolled.”

In response to the research, ICMA-RC launched a new comprehensive education campaign called “It Pays to Save.”

“It Pays to Save” is designed to broaden employer knowledge about saving trends among city and state government employees and provide them the tools they need to improve communication with those who are non-savers, and to simplify the enrollment and retirement saving process.

Municipalities across the country have adopted the program. A number of them have experienced success in getting employees to join the retirement plan they sponsor and begin saving for retirement.

For example, as part of the new campaign, the City of Thornton, CO increased financial planning and education opportunities, provided additional information about the city’s retirement plans, and began offering targeted age-specific retirement planning sessions for all employees.

Joaquin Garbiso, Benefits Administrator for the City of Thornton, said the campaign has been successful. Even in a tough economy, he said, employees have continued to contribute to their savings plans.

The Los Angeles County Metropolitan Transportation Authority (MTA) has also seen success with its savings campaign.

Donna Mills, MTA Assistant Treasurer, said the transportation authority rolled out its savings campaign primarily with the goal of increasing enrollment and plan participation among employees in the lower one third of its salary scale.

“We took a look at who was participating and where we thought we might be missing people. In doing that we determined that we were missing participants in that lower level,” Mills said.

A number of focus groups and interviews provided MTA additional insight as to why this group of individuals was not saving. Not feeling like they make enough money to save was a primary factor, Mills said.

“What we’re trying to do with this campaign is convey to people that you can start small and work your way up,” she said. “You don’t have to start with half your paycheck, just a small amount can get you on the road.”

Employers can learn more about the new initiative at ICMA-RC’s “It Pays to Save” Web site: www.icmarc.org/savers.