Orman Is Head of the Class in Avaya Program

How many people does it take to get 400 employees to attend a 401(k) educational session? According to Avaya, the answer is one. And that person is Suze Orman.

    On a tour that started April 1, the personal finance celebrity visited seven of Avaya’s offices as part of the company’s first 401(k) day. She was met with huge crowds–the turnout was so big at its Basking Ridge, New Jersey headquarters that the company had to move the event from the auditorium to the cafeteria. “We had to hire lighting and production people to make it work,” says Bruce Lasko, senior manager of global compensation and benefits.

    What was particularly effective about Orman was that unlike the typical 401(k) meetings the company had held, the focus was not just on 401(k) savings and diversification. Instead, Orman tied those ideas into credit card debt and other financial issues that people deal with every day.

    “One of the problems about retirement planning is that it can be boring and complex,” Lasko says. Orman, who has television specials, books and a waitress-to-wealth biography to her credit, was anything but that. Avaya employees who weren’t on the tour stops could view the speech through a webcast.

    Avaya also worked with John Wiley & Sons to publish a customized book, 401(k) for Dummies, which it distributed to employees. Lasko declined to say how much Avaya spent on the initiative.

    The Orman tour was Avaya’s attempt to solve the problem that many 401(k) plan sponsors face: how to get employees to focus on their retirement. For a year, the company had offered free online advice to help employees figure out how they should invest their 401(k)s. Despite providing training on the program, only 15 percent of employees had used it.

    Many companies have responded to employees’ seeming lack of interest in their 401(k)s by adding automatic enrollment. The problem with that, Lasko says, is that it does not prompt employees to think about and understand the issues involved with saving for retirement. “We want employees to take the first step,” he says.

    When it comes to how to choose investments, however, Lasko recognizes that employees need more hand-holding. The company provides automatic step-ups and rebalancing features, and Lasko is considering offering a managed-account program, which would enable employees to have their investments managed for them for a fee.

    Ted Benna, who designed the first 401(k) plan 25 years ago, says that Avaya’s approach highlights an issue that many companies miss. Too often, he says, employers just offer automatic enrollment without education. But sweeping employees into a plan at a 3 percent contribution rate does not mean they will have enough to retire, he says. “Also, it’s been proven that if employees are distracted by financial problems, it messes them up big time in terms of performance,” he says. That’s where Orman’s message about overall financial health comes into play.

    Whether Avaya’s approach will be successful in the long term remains to be seen. In April alone, however, the company saw 311 employees sign up for the 401(k) plan and 1,169 employees increased the percentage of their deferrals.

    Nevertheless, Alicia Munnell, director of the Center for Retirement Research at Boston College, thinks that not offering automatic enrollment is a mistake, no matter what kind of education an employer provides.

    “I think we should make 401(k) investing as easy as possible,” she says. “If this works for them, that’s great. But I don’t think it’s the most effective thing for everyone.”

Workforce Management, June 2005, p. 26 — Subscribe Now!