The growth in defined contribution plans has focused attention on issues such as whether workers can be educated to make wise decisions regarding their participation in such plans and what constitutes advice as opposed to education by an employer. This Issue Brief is the first of three that will explore these issues. It examines the public policy issues involved in participant education, discusses selected educational efforts and provides preliminary findings on their impact, and presents estimates of workers' relative preferences among various plan characteristics. Many defined contribution plans require workers to make decisions regarding participation, contribution rates, and asset allocation across available options.
Several characteristics impact the participant's time horizon and periodicity.
Work force diversity makes it difficult for a sponsor to satisfy the savings objectives of all participants simultaneously unless they provide asset allocation flexibility. Many companies are responding with innovative methods to enhance the strength of their participant education efforts. Three areas considered in participant education communication are the media used to transmit the message, the frequency of the message, and the content of the message.