The opinions expressed in this presentation are those of the speaker. The International Society and International Foundation disclaim responsibility for views expressed and statements made by the program speakers.

Behavioral Economics Communications for Employees’ BenefitSherida Ferguson, CEBSAdvocacy Board MemberGus A. Stavros Center for Free Enterprise and Economic EducationUniversity of South FloridaTampa, Florida

Deborah Kozdras, Ph.D.Instructor, Chief Creative OfficerGus A. Stavros Center for Free Enterprise and Economic EducationUniversity of South FloridaTampa, Florida

4B-1

Nudge, Nudge

While the beginnings of nudge theory have been around since before 1995, it was only made prominent through Richard Thaler and Cass Sunstein‘s  book on the topic in 2008. A “nudge” is anything which serves to predictably cause people to behave in a certain way without removing their choice in the matter. You can’t “nudge” someone if they have no option but to act in the way you want them to. Nudge Theory: How to Influence Decisions Without Ads. Ben Mulholland  March 8, 2019. Progress.St.®

4B-2

Obstacles to Successful Communication

• Behavioral Economics• Econs and Humans

• Bias

• Nudge

• Workforce demographics

• Five generations in the workforce.

• Generational communication preferences differ.

• Financial Stress• More expenses than income.

• Salaries fall behind inflation

• Student Loans

• Resources

4B-3

Employee Surveys

• Enrollment is a challenge. • Resources:

• Poll Everywhere• HR Tools 

• Gamification

• https://technologyadvice.com/gamification/

Through a questionnaire of your software needs will provide recommendationsfor vendors.

• Five ways to engage employees to take advantage of the benefits offered.

4B-4

4B-5

4B-6

A park wanted to encourage people to stop litter.You Could:Hand out fines for litteringPay people for using the garbage canPlace green footprints on the ground, pointing

the way to the nearest garbage can

Place green footprints on the ground,Pointing the way the to nearest garbage bin

4B-7

4B-8

4B-9

4B-10

Simplify the Process

4B-11

Econs (Spock)• Rational decision makers• Use cost/benefit analysis• Self interested to obtain maximum utility (financial)

• Think they don’t have biases

Humans (Homer Simpson)• Do not always use cost/benefit analysis to make decisions

• Can be distracted, inconsistent, and impulsive

• Do not always recognize personal biases and heuristics

Source: Council for Economic Education 

Behavioral Economics 101: Humans vs. Econs

4B-12

Fast Thinking • Gut reactions and learned patterns

• Can be wrong, but is often right

• Operates effortlessly• Influenced by biases and heuristics

Slow Thinking• Articulates judgments based on evidence

• Weighs costs and benefits of choices

• Requires effort • Examines biases or heuristics when so inclined

Behavioral Economics 101: Fast and Slow Thinking (Kahneman, 2011)

4B-13

Bias• Emotional distortion• Loss aversion• Anchoring• Inertia• Seeking confirmation• Temporal discounting• Habituation

Solution• Motivate with positivity• Accentuate the positive• Move the match• Use automatic features• Tell a story• Reframe the story• Changes things up

Strategies to decode human nature and improve employee savings. Empower Institute  white paper.

Decoding Human Nature*

4B-14

Rules for Nudges

Principles Frame messages clearly, using “gain’ and “lose”

for not selecting a feature.

Are you really going to give up 50 cents added for each dollar you put into your 401(k) account?

Instead of using the term save, say: “Will you spend 6% of your pay on yourself now, so you can enjoy life when you retire?”

“Would you rather pay yourself or the government? Increase your retirement savings and cut your taxes withheld and owed.”

80% of ABC employees contributed to their retirement last year.

Nine out of every ten new hires say “yes” to saving 15% of their pay for their retirement.

Framing ConsiderationsWhat will employees gain if the do this‐financially, socially, emotionally or physically?

What will employees lose if they don’t do this‐ financially, socially, emotionally or physically? 

Will promoting the gains work better in this situation, with these employees, or would highlighting losses work better?

How should we craft the message to actively suggest, or promote, either gains or losses. 

Norms: Descriptive Norms, use group Identification, where the employee will want to mirror the behavior. Injunctive norm describes “which behaviors are and are not approved. Additionally, it can promise social rewards or threaten social punishments.” Source. “Get Action Instead of Indifference: Using Behavioral Economics Insights to Deliver Benefits Messages.” John Moses, Ph.D./ Aon Hewitt.

4B-15

Techniques to Nudge the Desired Behavior.

Stress what could be gained or lost.Point out what others are doing right.Use testimonials versus eye-popping

statistics.Encourage individuals to picture their

retirement.Leverage competition.Use op-out versus opt-in features.Limit investment choices.Structure the menu of investment

choices.Use a stretch match.Provide access to a financial advisor.

4B-16

Obstacles to Retirement Success!

4B-17

Inertia, critical thinking, biases, loss aversion, a few of the obstacles to successful decision-making.

4B-18

Credit card debt hit an all-time high of $834 billion.

Mortgage debt also set a new high of $9.4 trillion.

Personal loan debt reached $291 billion, and grew faster than any other kind of debt.

Student loan debt also hit a record high of $1.37 trillion.

Auto loan balances reached $1.27 trillion, another all-time high.

“If one wants to get out and stay out of debt he should act his wage.” Anonymous

∞“Never run into debt, not if you can find anything else to run into.” Josh Billings

4B-19

Great Depression to Great Recession:A Generational Impact on All Generations.

4B-20

Five Generation Workforce

https://www.statista.com/statistics/797321/us‐population‐by‐generation/ http://mentalfloss.com/article/533632/new‐guidelines‐redefine‐birth‐years‐millennials‐gen‐x‐and‐post‐mllennials

4B-21

Engaging the 5 Generations That Make Up Your WorkforceWhat Do They Want?

• The Silent Generation (Before 1946) is 1% of the workforce

• Focus on remaining healthy and productive at work.

• Dealing with costs of prescriptions

• Want reasonable job accommodations, injury prevention and chronic condition management 

• Baby Boomers (1946‐1964)  27% of the workforce

• Concerned about sufficient retirement funds

• Remaining in workforce to support family.

• Want preventive health measures, including ergonomic enhancements, and fitness.

• Generation X (1965‐1980)  27% 

• Perks such as flexibility of work locations and hours, childcare, maternity/paternity leave, financial protection and education, and well‐being support

• Opportunities for growth paired with job security

• Preparation to take on leadership roles as more Baby Boomers Retire.

• Millennials (1981‐1996) 44%*

• A choice of benefits

• Maternity/paternity leave

• Remote work and control of their schedules

• Defer traditional asset ownership in favor of renting and investing in experience

• Generation Z (After 1997) 1%**

• Flexible workplace

• Concerned about student debt 

• Prefer to work collaboratively versus remotely‐74% prefer to communicate face‐to‐face  with co‐workers

• Rely heavily on their parents and social networks for financial advice.

• View exercise as an integral part of a healthy lifestyle.

Communications Preference

• The Silent Generation• Brief memos• Face to face meetings

• Baby Boomers• Phone• One‐on‐one and group meetings• Print Materials

• Generation X• Email• Phone

• Millennials• Online portals• Text• Face‐to‐face meetings

• Generation Z• Social media and video platforms such as YouTube• Online portals• Text• Visual content such as infographics.

*Projected to be 50% of workforce by 2020, as much as Baby Boomers and Generation Xers combined. **Projected to make up 20% of workforce by 2020, almost the size of Baby Boomers and Xers combined.

4B-22

Five Ways to Engage Employees

1. Acknowledge that decision support addresses personalized needs.

2. Know that year-round engagement improves benefits literacy.

3. Recognize the power of a total rewards statement.4. Think about different generations.5. Be sure employees know that savings vehicles contribute

to financial well-being.

4B-23

Ameritas® and the bison design are registered service marks of Ameritas Life Insurance Corp. Fulfilling life® is a registered service mark of affiliate Ameritas Holding Company. © 2016 Ameritas Mutual Holding Company. 

Strategic Plan‐Create a communications plan to effectively reach employees. Demographic groups, age, position, and if they have dependents. List health care needs and concerns for each audience. Identify communication tools for each group.

Social medias, text messages, informational meetings, newsletters, emails and digital recordings.

Create a schedule for distributing benefits information and reminders.       

Message Development‐ Employees prefer an enrollment process that is easy to understand plans and choices. Review messages to ensure consistent communication.  Create charts and infographics that help employees:

Compare health insurance costs Evaluate benefits coverage choices Understand the enrollment process Educate employees on the full value of their job by connecting earned salary with benefits costs.

Follow Up‐ Regularly talk with employees about their benefits. Encourage Questions and provide simple explanations. Set up appointments for employees to talk with the broker, insurance carrier, or 

financial adviser to review coverage and best option for employee.  Provide reminders throughout the year to assist employees in recognizing the 

value of their benefits and the importance of using their coverage. 

3 Ways Employers Can Simplify Benefits Communication

4B-24

Canadian Plan to Offer Nudges to Enhance Employee Participation and Boost Contributions

Great-West Life 2017 CAP Benchmark Report (CNW Group/Great-West Life Assurance Company) NEWS PROVIDED BY / Great-West Life Assurance Company / Feb 28, 2018, 12:34 ET

Here are 3 simple nudges to consider:

1. Make it quick—offer immediate eligibility.2. Make it easy—offer appropriate default fund options3. Make it count—implement auto-escalation ofcontributions

2017 CAP Benchmark Report represents an unbiased view of Canadian group retirement market trends

4B-25

Map the Context

A Practitioner’s Guide To Nudging. Kim Ly, Nina Mazar, Min Zhao, and Dilio Soman, March 13 2013 Rothman School Of Management, University of Toronto

4B-26

Decision Map

A Practitioner’s Guide To Nudging. Kim Ly, Nina Mazar, Min Zhao, and Dilio Soman, March 13 2013 Rothman School Of Management, University of Toronto

4B-27

Select the Nudge

A Practitioner’s Guide To Nudging. Kim Ly, Nina Mazar, Min Zhao, and Dilio Soman, March 13 2013 Rothman School Of Management, University of Toronto

4B-28

Identify the Levers for Nudging

A Practitioner’s Guide To Nudging. Kim Ly, Nina Mazar, Min Zhao, and Dilio Soman, March 13 2013 Rothman School Of Management, University of Toronto

4B-29

Prioritizing Nudges

A Practitioner’s Guide To Nudging. Kim Ly, Nina Mazar, Min Zhao, and Dilio Soman, March 13 2013 Rothman School Of Management, University of Toronto

4B-30

Decision Checklist

A Practitioner’s Guide To Nudging. Kim Ly, Nina Mazar, Min Zhao, and Dilio Soman, March 13 2013 Rothman School Of Management, University of Toronto

4B-31

Gamification is all play to make employee benefits enrollment more fun! Increasing participation is a bonus.

Gamification• Accelerate onboarding

o Ensure participation and effectiveness of training.

o Accelerate ongoing use of learning management resources.

Team Building• Focus teams on employee benefits and

enrollment success.• Encourage collaboration and competition.

4B-32

Save More Tomorrow Retirement Participation: Auto-enrollment

SMarT Features• Automatic savings for 401(k)

• Participants sign up today to have their deferral rate increased in the future, typically at the next merit review or pay increase.

• Increase is set amount. For example, 1% or 2% of pay.

• Employers may impose a cap, such as 10% or 15%.

Example:• Participant deferring 3% of salary into

401(k)• Participant agrees to have their

deferral rate increase by 1% a year to 4% after the first year.

• The participant continues until in seven years they cap out at 10%.

• The participant can change the contribution or stop participating. The law of inertia may work in the employees favor, and they continue with the participation.

4B-33

SMarT Results

4B-34

Save More Tomorrow Success Rates

4B-35

Communications: SMarT Program

• Division A• Meetings were mandatory.

• 67% attendance by enrollees.

• Local CFP® presented atenrollee meetings.

• Optional one‐to‐one counselingsessions on importance ofsavings.

• Division B• Meetings were optional

• 40% attendance by enrollees.

• No one‐to‐one meetings.

• A Vanguard representative was on‐site tosupport all meetings

• Both locations had incentives, a random cashprize for enrolling in the SMarT plan,attendance gifts and company product raffles.

4B-36

Will You Save More Tomorrow?

Takeaways• The employees are selecting an option that will take place a year later. No

immediate cost to employee.• Often, when the timing is the next year’s raise, the employee will not

notice a significant change in their paycheck.• The employee agrees to continuing the increase at a select rate until a

preset maximum is reached.• The employee can opt out of the plan at any time. • A status quo bias works due to the employee having to make the decision

to participate well in advance of the money being deducted from their paycheck.

4B-37

A Framework for Changing Behaviors*

Strategies to decode human nature and improve employee savings. Empower Institute  white paper

4B-38

Messaging to Entice the Employee to Action!

4B-39

Ask Your Vendors For Assistance Communicating to Your Employees.

Source  SegalBenz, 10 Keys to Unlocking Successful Benefits Communication Worksheet.

4B-40

Resources

4B-41

Takeaways:

1.) Employ, explore, and identify Behavioral Economic techniques to encourage employees to select the best solution to achieve personal financial goals.

2.) Explore polling techniques to craft messages to guide each employee to the best solution for his or her economic circumstances.

3.) Identify the digital tools to reach the diverse experiences of a multi-generational workforce to select employee benefits.

Questions and Answers

4B-42