Words matter. Don’t think so? The publisher of a King James Bible in the 17th century who left out the word “not” in the commandment “thou shalt not commit adultery” and who suffered the consequences would beg to differ. And words matter in retirement plan communications as well, as recent analyses and studies discuss.
“Could the actual words used within the communications add to participant confusion?” asks Micheal Webb in a recent entry in Cammack Retirement’s “Insights” blog. In answer to his own question, Webb cites two studies, the results of which he calls “captivating” and the implementation of which he believes “can help enhance retirement plan communications.”
The public “often misunderstands words that are commonly used by financial providers, employers and others in the retirement planning industry,” says the Empower Institute in one of those studies. For good measure, Rosemary Hardin, in the Buck Consultants blog entry “From Flossing to 401(k)s: Plain Language Speaks to our Audiences,” also has noted, “Most employees are not native benefits speakers; they don’t want to be and they don’t need to be.” She adds, “Benefits are complex, kinda dry and often easy to ignore. Most of the time, all our readers really want to know is, “What’s in it for me?”
Not only that, Webb observes, misunderstanding wording can exacerbate other sources of confusion. He cites a study in which DreamForward found that plan participants found rollovers and employer matches confusing, and withdrawals even more so; Empower, he adds, found that common parlance concerning those functions doesn’t help the situation.
The result? Confusion and inaction. Poor wording and communication, Webb writes, “can leave participants confused and impede their ability to make retirement plan-related decisions.” Hardin strikes a similar note, writing, “When we give them more or our delivery isn’t clear, we affect their ability to take the right action.”
As consultants and HR professionals, we live and breathe benefits, so it’s easy to forget that just outside this circle of jargoneers is our audience: Employees who don’t think about benefits except maybe — maybe — during open enrollment or when there’s a claim problem,” writes Hardin.
“Using the right words is especially critical in financial matters,” says Empower. They argue that “employees need to understand their retirement plan options so they can make the best decisions for their future.” And sometimes simple nuance is sufficient to address confusion resulting from verbiage, Webb argues. For instance, he notes that participants in Empower’s study said that “employer match” was preferable to “match” and that “contribution rate” was better than “savings rate” and “deferral rate.”
Hardin also advocates having a strategic plan regard communications, and warns that without one, “messages can feel overwhelming, disjointed and perplexing — no matter how simply they’re written or beautifully they’re designed — and end up unread in a recycle bin or in the deleted-emails folder.”
“Retirement plan sponsors should review their plan communications for any offending jargon and either offer a simple explanation as to its meaning or remove it entirely,” Webb argues, adding that “Nuances and terminology preferences should be considered, and the final phrase should be used consistently across communication pieces.” Webb further suggests seeking the views of a focus group less familiar with retirement plans concerning the wording of a piece of communication before sending it to participants.
“Carefully culling messaging language,” says Webb, can help ensure that plan communications “are well received, easily understood, and elicit the desired action.” Hardin, similarly, writes, “Sending the right messages to the right audiences at the right time through the right channels can do wonders for understanding and action.”