In 2014, administrators of the Ohio Deferred Compensation
Plan (Ohio DC) realized they needed new ways to encourage retirement saving as many
eligible employees were not enrolling in the plan and many participants in
their plan were not saving enough. Their state pensions currently provide only
an average of 52% replacement income and participants were not eligible for Social
Security. The Ohio DC plan needed a way to encourage eligible employees to sign
up and to increase their savings rates over time so they would have meaningful
financial resources to supplement their pensions.
The Ohio DC plan had a history of using behavioral economics
to tailor plan features and communications to meet the needs of many different
types of eligible employees. In 2014, Ohio DC introduced auto enrollment and
improved upon its existing opt-in/out enrolment form to improve retirement savings.
The Ohio DC plan was awarded a NAGDCA Leadership Award in 2015 for its Plan
The multi-employer plan includes 1,800 employers and 180,000
participants. The plan implemented auto enrollment, first utilizing a pilot
program with several employers to test the effectiveness. To encourage
employers to consider auto enrollment as a new plan feature, the pilot focused
on the minimal effort needed from the individual employer. Average enrollment
for the employers who participated in the pilot plan grew from 72% to 96% of
newly hired employees. After the successful pilot, Ohio DC surveyed individual
employers and found that 100 of them had a strong interest in auto enrollment.
The Ohio DC plan then amended their Plan Document to add auto enrollment as a
new feature that employers could elect.
The next phase of their plan design improvement involved
partnering with the National Association of Retirement Plan Participants (NARRP)
to revamp their opt-in/out enrollment form for new State employees so it wasn’t
just an “institutional form,” but rather one that created a conversation with
the new employee and included enhanced active choice language. The language
made it clear that by opting in, they were taking a step toward retirement
security and a more comfortable lifestyle in their future, while opting out
would not contribute to secure financial future.
The new form also included a more flexible deferral option,
changing from a minimum of $15 and a blank space for deferral elections to no minimum
and check boxes for suggested deferrals from $25 to $75 and a box for ‘Other.’
This encouraged participants to consider higher contributions, but also allowed
savers to start at whatever amount they chose.
The auto escalation section of the form was also updated for
the Ohio DC plan, changing from an opt-in to an opt-out box, which encouraged
participants to be enrolled in auto-escalation and contribute more to their DC
plans over the lifetime of their employment in the state of Ohio.
These small changes came with big results. The Ohio Deferred
Compensation plan enjoyed a 25% increase in new enrollments from the opt-in/out
enrollment form and a 680% increase in auto escalation usage following the
implementation of these changes.