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You Can Lead a Horse to Water…

There’s an old saying: “You can lead a horse to water, but you can’t make him drink.” It’s the lament of many a retirement plan professional who has tried to persuade an employer to offer a workplace retirement savings plan for his/her workers, only to be rebuffed.

Moreover, it’s a sentiment expressed by many a benefits manager who has devoted significant time and effort to plan design, only to find the adoption rate by individual workers to be “disappointing.”

To which many often just, with a roll of the eyes and a shrug of the shoulders, say — “what can you do?”

Sure enough, while governments, both state and federal, have the ability to pass laws that can mandate or coerce such actions, those who work with retirement plans must rely on some combination of rational persuasion and moral suasion.

Not that there aren’t compelling rationales for employers to offer retirement benefits in the workplace. In addition to the traditional motivations of helping to attract and retain good workers, there is a sizeable and growing body of evidence that financial wellness not only results in more productive workers, but in a stronger bottom line for the employer — and retirement readiness seems to be a critical component in achieving that sense.

Moreover, there’s ample evidence that individuals who have access to a savings plan at work do, in large part, take advantage of that opportunity — indeed, that is often cited as a key rationale in support of establishing these state-run programs for the private sector. Consider that average participation rates in excess of 70% are commonly reported in industry surveys, and that’s for plans that don’t take advantage of automatic enrollment, where the participation rates nearly always cross — and stay across — the 90% threshold.

Now we all know that all workers don’t have access to retirement plans at work (though when it comes to full-time, full-year workers, we’re likely talking about 20 million earning between $30,000 and $100,000/year, rather than the 50% figure that is generally bandied about), and those who do don’t always take full advantage — with some saving below the employer match levels of their plan, many older workers failing to take advantage of catch-up contributions, while many, perhaps most automatically enrolled workers leave those relatively low initial default contribution rates in place.

Still, studies by the non-partisan Employee Benefit Research Institute (EBRI) have established that merely having access to a defined contribution plan at work can have a significant positive impact on one’s retirement readiness rating, simply because it greatly enhances the likelihood that those individuals will participate. And once they start – well, the first step always seems to be the biggest one. And while I don’t recall seeing statistical evidence to this effect, once an employer offers a plan — perhaps because he or she once benefited from being employed by an organization that offered one — well, the decision to do so again should be less intimidating, if not easier.

Which brings us back to my original premise. Those who say that you can only “lead a horse to water” might well expect that a horse will drink when it’s thirsty, or when it needs water — but equine experts will tell you that many horses refuse to drink when they need to most, especially in times of competition, illness, travelling or stress. So, while you may not be able to make horses drink, it’s generally important for their health and well-being to find ways to encourage them to do so — adding a little salt in their diet, for instance, or putting an apple in their water bucket.

That’s why those who work with retirement plans — and who work to persuade those who don’t currently offer such programs to do so — are so important. Every new plan you encourage enhances the odds that more workers will participate, every automatic enrollment program you implement opens that door to even more, and every automatic enrollment program that you persuade to step up the default, or prompt to provide a regular acceleration of that initial deferral brings more workers ever closer to a finically secure retirement.

It’s important work. It matters.

Because ultimately, not only can you lead that “horse” to water… you can help him think.