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September 26, 2006
Communicating Based on 'Life Stages'--Same Benefit, Different Words

Your 401(k) plan is a great benefit for several reasons. Employees can save money on their income taxes. They can build a substantial sum toward a comfortable retirement. And if you offer a matching contribution, employees who don't save are leaving money on the table.

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These are all good reasons for an employee to join the plan, yet each reason may appeal to a different group of employees. Same benefit, different reasons: that's the basis for what MetLife's Randy Stram calls life-stage communication.

Life-stage communication can be applied to every benefit you sponsor, Stram says, not just your 401(k) plan. "We believe that this is the next evolution of benefit communications," he explains. "We've segmented employees into four distinct life stages: singles, young families, Baby Boomers, and pre-retirees. The needs of these four segments are very different. For instance, for someone who is single or perhaps has a young family and is concerned about disability insurance and what would happen if he or she became disabled and was unable to pay the bills for a protracted period of time, disability insurance is very important.

"On the other end of the spectrum, employees in the pre-retiree segment are less likely to be concerned about disability (insurance).

"It's certainly important, but perhaps more important to them would be long-term care insurance. They're closer to the life stage where they may need long-term care, and if they don't have the insurance, it could have long-term consequences to their financial plans and, in all likelihood, their retirement plans.

"And for young families, the need for life insurance is greater than it is for someone who is a pre-retiree, whose children are already through college, and who may have fewer financial obligations that would need to be offset with life insurance."

Notice that Stram does not speak of offering different benefits to the various employee segments. The idea is communicating the benefits you already have, differently.

Changing Strategy May Save Money

In fact, Stram emphasizes that communicating the benefits effectively can often save you money. "I would argue that monies would be better spent enhancing the benefit communication, as opposed to enhancing the benefit plans overall. The ideal would be to do both. But I think as a starting point, employers need to maximize the perceived value of the benefits they currently offer, before they consider offering more benefits."

"The good news," Stram continues, "is that this kind of communication is not that much more expensive to develop. Maybe looking at your own employee population, you'll find that you don't have concentrations of employees in all four of the segments. Maybe they're in just two or three of the segments.

"The cost of doing this is really not that significant and oftentimes can be borne by the insurance company that is making the products available to the employees. [Insurance companies] also realize that a segmented communication plan is more effective in not only increasing the awareness and appreciation for the benefit offerings, but also the utilization of the benefits that are made available."

Stram backs that up with an analysis of MetLife customers that have used focused communications. For the past 2 years, the analysis has shown that employee participation is three times greater when communication materials are personalized when compared to the use of generic, nonpersonalized enrollment materials.

"That's particularly so when you're talking about voluntary products," he continues, "which are becoming increasingly popular, like long-term care, group auto and home insurance, critical illness, or prepaid legal plans. So many times, the cost of the communications can be borne by the insurance company that is underwriting the plan."

However, if you're handling the communications in-house or supplementing the provider's communications, where do you begin? Like so many other things in Human Resources, you need to start with an understanding of your employee demographics.

"The first step is understanding the segments of the employees," says Stram, "and the diverse needs of those employees. At the very beginning, of course, the benefit plans need to be designed to meet those diverse needs." Right on the heels of plan design should be a comprehensive benefit communication plan.

Focusing Communication Can Increase Retention

"Employees are clearly asking for more information and education and guidance around what benefits make sense for them," Stram continues, citing MetLife's most recent trends study. It says that most employees don't believe their benefits communications to be effective, and they want more information and more decision-making tools. "We believe that one of the first steps in maximizing the perceived value (of the benefits) is developing a comprehensive, targeted communication plan, and we believe the employers that do that will reap benefits by attracting and retaining employees."

Stram is basing that belief on statistics revealed by the trends study he cites. "What we see in the most recent study is that, increasingly, benefits are factoring into the decisions that employees make about whether they stay with a given employer, or whether they switch employers, when they decide to switch, and to whom they switch.

"In the 18 months preceding the study, nearly one-fourth of the workforce had changed employers. Obviously, that makes recruiting and retaining employees a top priority for employers.

"Of the employees that did switch jobs, nearly one-third said that benefits were an important factor in their decision. They said that the benefits that were available at their new employer impacted their decision. And for retaining current employees the benefits are important, too, according to the study. Four in 10 employees said the benefits offered to them are an important reason they stay with their employer."

Increasing Perceived Value

The bottom line, Stram says, is making sure current and potential employees perceive value in your benefits. "If an employer does not have an effective benefits communication program, they are not maximizing the value of the benefits they offer, and are not increasing the perceived value of their plans for their employees.

"There is a strong correlation between the satisfaction with an employer's benefit plans and overall job satisfaction. We've seen that correlation in the study for a number of years.

"We also know there is an even stronger correlation between the overall benefits satisfaction that employees cite, and the effectiveness of an employer's benefit communication plan. For small employers, for instance--one that has between 2 and 25 employees--only 16% of employees say the benefits communications they receive are effective. And about 29% of those employees state that they're satisfied with their benefit plans. On the other end of the spectrum, for those employers that have 25,000 or more employees, 39% state that they believe they receive effective benefits communications, and the satisfaction rate goes from 29% to 48%."

Three Steps Toward Focused Communications

If you want to try focusing your communications, try these three steps:

  1. Determine your company's demographics. Break down by age, family status, years of service, pay, etc. Once you know the breakdown, assign them to categories that make sense for your company--use the categories MetLife does, or come up with your own.
  2. For each benefit, decide how it would appeal to each category and create materials emphasizing those points.
  3. Create a tracking system, so you'll know next year what worked and what didn't for each category. Consider asking employees for input.

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