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NAGDCA Note: 2015 NAGDCA Leadership Award Winner Case Study – Ohio Deferred Compensation and Behavioral Economics

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 Design improvements.

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.


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