FINAL REPORT FOR. Evaluating Employer-Provided Financial Education Programs for Pre-Retirees. Funded by FINRA Investor Education Foundation

FINAL REPORT FOR

Evaluating Employer-Provided Financial Education Programs for Pre-Retirees Funded by FINRA Investor Education Foundation

Principal Investigators Robert L. Clark

Professor

Department of Economics

Department of Management, Innovation, and Entrepreneurship North Carolina State University

Melinda Sandler Morrill Assistant Professor Department of Economics North Carolina State University

Steven G. Allen

Associate Dean of Graduate Programs and Research Poole College of Management

North Carolina State University Submitted June 2011

i

EXECUTIVE SUMMARY

For the past three years, the principal investigators have worked with nine large national

employers to examine the financial education and retirement planning programs they provide for

their employees nearing retirement. This final report presents the findings of this study which is

based on information included in three separate data files. The first data file is based on

information obtained from 1,182 individuals who completed surveys before and after

participation in seminars provided by five of the employers. Using these data, we develop the

Participants Attending Retirement Seminars (PARS) data file. The second data file is based on a

follow-up survey of the PARS respondents which was sent to these individuals approximately

one year after their participation in the seminar, named the PARS3. The third data file is

constructed from a survey sent to all retirement eligible participants in three companies that did

not offer retirement planning programs at the time of the survey. This data file is the Retirement

Expectation Survey (or the REXS) data file.

The research from this project has produced a series of important findings that have

received considerable national and international attention. The research methodology and the

data are described in detail in the various chapters of the final report. As the project ends, we

have already published several papers (see last section of this report) and made a series of

national and international presentations based on this research. Our research is unique in its

focus and our findings have received considerable attention. We have observed interesting

behavioral patterns and have shown that financial education and retirement planning can increase

knowledge and on the basis of newly acquired information, many workers modify their

retirement behavior. However, we have only begun to examine the information contained in the

provide an opportunity for us to continue our research on workplace financial education and

retirement planning programs. The unique data files provide the potential for a series of papers

and future presentation in the years to come that will help define the role of financial education

in the workplace.

In this Executive Summary, we highlight the most important findings from our research.

The information from the PARS shows that workers who participate in the retirement planning

seminars significantly increase their level of financial literacy and their knowledge of retirement

programs including employer-provided pensions and health plans, Social Security, and

Medicare. On the basis of this new knowledge, many workers alter their retirement plans

including their expected age of retirement from their career employer, their plans to work after

retirement, their age of claiming Social Security benefits, and the method of accessing pension

accounts. We show that learning occurs for all groups; however, greater gains are achieved by

those with relatively low pre-seminar levels of financial literacy and for groups that tend to be

more at risk such as those with less education, lower earnings, and women.

An important consideration for employers is the finding that participants in these

programs rated the seminars very highly and indicated that they provided substantial and

important information that workers need to develop their retirement plans. The seminars

increased employee understanding of retirement benefits and the employees indicated that they

valued these programs. Survey responses showed that participants appreciated the programs

provided by their employers. The findings can be used to support the business case for

employers offering their older employees financial education and retirement planning.

The PARS3 survey showed that workers retained much of the increase in financial

iii

programs and they believed that due to the retirement planning program they will be better able

to make retirement decisions. On the basis of this research, there is evidence that retirement

planning seminars have long term effects in enhancing financial literacy.

The REXS survey enabled employers without retirement planning programs to get a

direct measure of worker preferences and attitudes about the need for such events. Responses to

REXS clearly indicate that older workers have a strong desire for their employers to offer a

retirement planning program and that they would attend programs if offered. This survey also

revealed a rather low level of financial literacy among the employees and the need for financial

literacy programs. A unique finding in the analysis of the REXS was that informational errors

have asymmetric effects. Workers who believe Social Security and pension plans have higher

retirement ages that they actually do plan on retiring later; whereas workers who believe the

retirement ages are lower than they actually are sometimes plan to retire earlier. Thus, learning

and enhanced knowledge will affect workers differently depending on their prior beliefs.

While the researchers have already written a series of papers using the data they have

collected, further research using these data is warranted. The PARS and PARS3 contain a

wealth of data that should be used for additional research. The seminars occurred over an 18

month period from June 2008 to December 2009. Thus, the survey period spans the economic

downturn and the subsequent recovery. Analysis should allow researchers to examine the impact

of the recession on retirement plans. Unexplored topics include the effect of health and life

expectations on retirement plans such as the choice of lump sum distributions and annuities, the

impact of spousal health and work status, a more detailed assessment of how changes in

knowledge affect retirement plans, and whether the length of the seminar affects the extent of

The final report also includes a template that employers that currently do not have a

retirement planning program can use to assess their workers desire for such programs. This

document includes the survey used to construct the REXS data file. Employers can modify this

survey instrument to suit their own needs by focusing on specific characteristics of workers,

tailoring the questions concerning benefits to fit their own situation, and to identify the

preferences of their own workers. We also have developed a template that will enable employers

with retirement planning programs to evaluate and improve their seminars. This document

includes the surveys used to construct the PARS and PARS3 data files. Employers who are

spending the resources to offer retirement planning and financial literacy programs should be

interested in evaluating these programs for their effectiveness in increasing financial knowledge

and assisting workers to make better retirement decisions. The templates provided in this report

provide useful evaluation tools that can be adopted by employers to assess the knowledge gains

of their employees and to observe how the increased economic knowledge alters retirement

v

TABLE OF CONTENTS

EXECUTIVE SUMMARY

ACKNOWLEDGEMENTS

TABLES AND FIGURES

CHAPTER ONE

Employer-Provided Retirement Planning Programs: Overview of Research

CHAPTER TWO

Can Employer Provided Pre-Retirement Planning Seminars Increase Financial Literacy and Retirement Preparedness?

CHAPTER THREE

Pensions Plan Distributions: The Importance of Financial Literacy

CHAPTER FOUR

Knowledge Retention From Retirement Seminars: One Year Follow-Up Survey

CHAPTER FIVE

The Role of Financial Literacy in Determining Retirement Plans

CHAPTER SIX

Employer Templates for Evaluating Financial Education and Pre-Retirement Planning Programs

REFERENCES

PUBLISHED PAPERS BASED ON FINRA GRANT

PRESENTATIONS AND EVENTS

ACKNOWLEDGEMENTS

This project began in March 2008 when the FINRA Investor Education Foundation awarded a

three year grant to North Carolina State University to examine the effectiveness of retirement

planning programs offered by employers to their retirement eligible workers. The research team

of Robert Clark, Steven Allen, and Melinda Morrill sought employer partners who were willing

to allow the investigators to monitor and evaluate their retirement planning programs. We

appreciate and acknowledge the cooperation of employer partners without whom this research

could not have been conducted. Our employer partners in this research were BD, BB&T, North

Carolina State University, State Farm, Progress Energy, the University of Washington,

WakeMed, Weyerhaeuser, and The Williams Companies. Throughout the project, Jen Maki,

Stephanie Riche, and Evan Rogers have provided important assistance with data development,

vii

TABLES AND FIGURES

Table 1.4. Employer Means

Figure 2.1. Knowledge Score Pre- and Post-Seminar

Figure 2.2. Changes in Knowledge Scores Pre- and Post- Seminar Table 2.1. Construction of PARS Dataset

Table 2.2. PARS Data Descriptive Statistics

Table 2.3. Participant Knowledge Before and After the Seminar Table 2.4. Participant Index of Knowledge Pre- and Post-Seminar

Table 2.5. Estimated Coefficients from Knowledge Equation Before and After the Seminar

Table 2.6. Respondents‟ Retirement Plans Pre- and Post-Seminar

Table 2.7. Estimated Coefficients from Planned Age of Retirement Equation Pre- and Post-Seminar

Table 2.8. Estimated Coefficients from Change Planned Age of Retirement Equation Pre- and Post-Seminar

Table 2.9. Demand for Program and Evaluation

Table3.1. Mean Values of Respondent Characteristics

Table 3.2. Disposition Choices by Respondent Characteristics

Table 3.3. Disposition Choices by Spouse Employment Status and Investment Information Source

Table 3.4. Disposition Choices by Health and Subjective Survival Probabilities Table 3.5. Disposition Choices by Wealth, Savings, and Earnings

Table 3.6. Disposition Choices by Investment Strategies and Financial Knowledge Levels Table 3.7. Disposition Choices by Spousal Characteristics

Table 3.8. Disposition Choices for Defined Benefit and Defined Contribution Plans Table 3.8(a). Disposition Choices for Defined Benefit and Defined Contribution Plans by

Knowledge

Table 3.8(b). Disposition Choices for Defined Benefit and Defined Contribution Plans by Information

Table 3.8(c). Disposition Choices for Defined Benefit and Defined Contribution Plans by Economic Indicator Variables

Table 3.8(d). Disposition Choices for Defined Benefit and Defined Contribution Plans by Health Indicator Variables

Table 3.8(e). Disposition Choices for Defined Benefit and Defined Contribution Plan by Spousal Variables

Table 3.9. Changes in Disposition Choices after Attending the Seminar

Figure 3.1. How Learning Affects Plans for Disposition of Employer-Provided Pensions Figure 3.2. How Learning Affects Plans for 401(k) Disposition Choice

Table 4.1. Construction of the PARS3 Dataset For Regressions Table 4.2. Comparison of PARS and PARS3 Samples

Table 4.3. PARS3 Summary Statistics

Table 4.4. Survey Three Knowledge Score Comparison

Table 4.5. Program Evaluation and Selected Retirement Planning Questions From Survey Three

Table 4.6. Comparison of Retirement Plans Reported in Surveys One, Two, and Three

Table 5.1. Mean Values of Respondent Characteristics

Table 5.2. Retirement Expectations and Plans of Respondents Table 5.3. Mean Responses Knowledge Questions

Table 5.4. Average Knowledge Scores by Categories Table 5.5. Knowledge Score Regression

Table 5.6. Mean Planned Age of Retirement by Knowledge of Ages of Eligibility Table 5.7. Planned Retirement Age Regression

Table 5.A1. Response Rate and Sample Creation

Table 5.A2. Percentage Answering Correctly for 14 Knowledge Questions Table 5.A3. Comparison to Nationally Representative Data

1

CHAPTER ONE

Employer-Provided Retirement Planning Programs: Overview of Research

retirement over the next decade. As retirement approaches, these older workers must make a

series of important decisions, some of which will be irreversible. These choices will determine,

in part, their income levels in retirement, the sensitivity of their income to economic fluctuations,

and their ability to maintain consumption through retirement. To make the transition into

retirement successfully, people will need to rely on their financial literacy and knowledge about

retirement programs offered by employers and the government. Without accurate information

and sufficient financial literacy, many may make inappropriate employment and investment

choices that could have significant consequences in their retirement years. Recent work in

economics, finance, and other social science disciplines examines the level of financial literacy

and its role in economic decision-making to determine whether and how individuals can improve

their knowledge base.

This Final Report presents evidence from a unique, three year research project funded by

the FINRA Investor Education Foundation to examine the retirement planning and financial

literacy programs offered by employers to their older employees. The findings from this project

indicate that participants in pre-retirement planning programs can enhance their financial literacy

and increase their knowledge of retirement benefits. The findings also indicate that on the basis

of this new information, many seminar attendees alter their retirement plans. Consequently,

increase their understanding of key retirement concepts, enabling their employees to achieve a

more desirable retirement.

1.1. Retirement Decisions and Knowledge Requirements

When individuals enter the labor force, they must immediately begin making important

choices about their lifetime consumption and saving profiles. Lifecycle theory suggests that

individuals set retirement goals and targets early in their careers. In order to achieve these

retirement goals, workers exhibit saving and investment behavior consistent with their goals. As

new information becomes available, people will re-optimize their consumption and saving

patterns, and they may alter their retirement expectations using this new financial knowledge.

The primary retirement goals that workers must set include their age of retirement and their

savings level, including retirement income. A fundamental principle in retirement planning is

that younger retirement ages and higher retirement incomes require more saving and less

consumption throughout the working life.

While considerable attention has been paid to the undersaving of American workers,

much less attention has been focused on how older workers make decisions concerning the

allocation of their resources as they enter into retirement. Workers must decide when and how to

enter into retirement, and how to best use the resources available to them. Limited available

evidence suggests that older workers do not have sufficient knowledge or the financial literacy

needed to make the many choices that must be made as they transition from work to retirement

(Bernheim 1995, 1998; Hilgert and Hogarth 2002; Lusardi and Mitchell 2006, 2007). Incorrect

or insufficient knowledge can lead to suboptimal choices. For this reason, programs that increase

financial literacy and retirement benefit knowledge can improve retirement decisions and produce better retirement outcomes (Clark and d‟Ambrosio 2003; Clark et al. 2006; Lusardi

3

2008). Pre-retirement planning seminars can efficiently address the numerous questions and

concerns which individuals approaching retirement share, thereby reducing human resources

(HR) costs.

Some of the most important decisions older workers must make are:

When to retire from their career jobs

Whether to take a lump sum distribution from a defined benefit pension plan or to

accept the annuity option

When to claim Social Security benefits

Whether to annuitize all or part of 401(k) and/or 403(b) account balances

How to manage investments in retirement

For workers to make these important choices, they must have an appropriate level of financial literacy, understand financial mathematics, and have accurate knowledge about their employers‟

and national retirement programs. Workers can acquire the needed knowledge to make these key

decisions in various ways, and one resource often available is employer-sponsored pre-retirement

planning programs.

Many large employers offer some type of planning seminar for retirement-eligible

employees. Sabelhaus, Brogdan, and Holden (2008) report that 46 percent of pension

participants covered by defined contribution plans work for companies that provide resources to

assist participants in retirement choices. Thirty percent of participants have the opportunity to

attend employer seminars and workshops, and almost 85 percent of these rely on this information to „some‟ or a „great‟ extent in making their retirement decisions. In a plan sponsor survey, Wray

income planning. While not universal, employer-provided retirement planning programs are

common, accessible to perhaps one-third of the labor force.

Although many believe this type of program is beneficial to employees, relatively little is

known about the effectiveness of these programs in enhancing the knowledge of, and altering the

retirement decisions of, employees. In this research project, the pre-retirement programs of

several large national employers were examined. The principal objective of the research was to assess whether these programs are successful in improving workers‟ knowledge base as they

near retirement. Also studied was whether employees alter their retirement plans on the basis of

this learning. Finally employee views of these programs are explored, including whether they

thought the programs were worthwhile and whether the seminars are seen as a valuable

employee benefit.

The key findings are that participants increase their financial knowledge and in response

to enhanced financial literacy, many alter retirement behavior. Workers appreciate these

programs offered by their employers. Knowledge gained varies with age, sex, income level,

education, tenure, and wealth. Participants also report that they changed retirement plans,

including altering their expected retirement ages, plans to take lump-sum pension payouts, and

when they anticipated claiming Social Security benefits. Employees value these programs and

report that the programs enhance their opinion of their employers.

1.2. Employer Partners

To evaluate employer-provided pre-retirement planning programs, we assembled a team

of nine large employers ranging in size from 8,000 to 40,000 employees. Our employer partners

are Becton, Dickinson, and Company (BD), Branch, Banking, and Trust (BB&T), North

5

Weyerhaeuser, and the Williams Companies. The employee populations of these companies

vary by gender, education, earnings, and geographic location. This section briefly describes each

of the employers, their retirement benefits, and their pre-retirement planning programs for

retirement eligible employees. Table 1.1 summarizes some key information about the retirement

benefits offered by these nine employers.

[Table 1.1]

Becton, Dickinson, and Company (BD). BD is a global medical technology company. According to their website, their focus is on “improving drug delivery, enhancing the diagnosis of infectious diseases and cancers, and advancing drug discovery.”BD develops, manufactures and sells medical supplies, devices, laboratory instruments, antibodies, reagents and diagnostic products through its three segments: BD Medical, BD Diagnostics, and BD Biosciences. It serves healthcare institutions, life science researchers, clinical laboratories, the pharmaceutical industry, and the general public. BD was founded in 1897 and is headquartered in Franklin Lakes, New Jersey. BD employs approximately 28,000 people in approximately 50 countries throughout the

world.

BD converted its traditional defined benefit plan to a cash balance plan in April 2007.

The traditional plan was integrated with Social Security and had a formula of 1 percent per year

of service for earnings up to the average final covered compensation plus 1.5 percent times years

of service times any average excess earnings over the Social Security earnings limit. All

employees hired prior to the conversion date were given a choice to remain in the old plan or

shift to the new plan. This recent pension choice may have stimulated employees to learn more

about their retirement benefits and enhanced financial literacy among BD employees. BD also

offers a Saving Income Plan with a company match that was increased from $0.50 per each

dollar of employee contributions up to 6 percent of salary. Retirees are eligible to participate in

the company health plan provided they are age 55 with 10 years of service or age 65 with 5 years

of service. BD offers a pre-retirement planning program that is presented by the Ayco Company. The typical program is 4 hours long and has on average 20 employees attending per session.

Branch Banking and Trust (BB&T). BB&T is a publically traded company and is the 10th largest financial service corporation in the United States. BB&T is a full service financial

institution with business segments including banking, insurance and investments. The company

was founded in 1872 and is headquartered in Winston-Salem, North Carolina. They have over

30,000 employees and operations in 13 states and Washington D.C.

BB&T offers employees who have completed one year of service (12 consecutive months

in which the employee has completed at least 1,000 hours of service) and have reached age 21

the opportunity to participate in the BB&T Corporation Pension Plan. In addition to the pension

plan, BB&T offers a supplemental savings plan, the BB&T Corporation 401(k) Savings Plan.

BB&T provides a 100% match on the first 6% of compensation contributed to the plan.

Employees are eligible to participate in the plan on the first day of employment but do not

qualify for the match until they complete one year of service and reach age 21.

Currently BB&T requires that managers discuss retirement planning with employees at

annual reviews. They do not have a formal pre-retirement planning seminar, but conducted a

survey of employees in 2008 to gauge interest in such a program. The survey results showed a

strong preference for employer-provided financial education programs and according to Steve

Reeder, Benefits Manager, BB&T will develop and begin offering such a program in the coming

7

North Carolina State University. North Carolina State University (NC State) is a public land grant university with more than 31,000 students and nearly 8,000 faculty and staff. NC State is

located in Raleigh, NC. Faculty and staff of NC State are employees of the state of North Carolina and are eligible to participate in Teachers‟ and State Employees‟ Retirement plan

(TSERS). The benefit formula is 1.82 percent of average salary during the employee‟s four

consecutive highest-paid years of employment times years of service. Faculty members also have

the option of enrolling in an Optional Retirement Plan (a defined contribution plan) instead of

the state plan; however, the seminar was restricted to employees enrolled in TSERS. The

University offers employees several supplemental retirement plans (401(k), 457, and 403(b)

plans) but does not provide any employer match. Retirees are eligible to remain in the state

health plan after retirement without any retiree premium as long as they are receiving a monthly

pension benefit.

Prior to the start of this project, the HR division of NC State offered several short

retirement planning programs; however, an all day program was developed in 2008 for

employees enrolled in the state retirement plan.

Progress Energy. Progress Energy is a Fortune 250 energy company with more than 21,000 megawatts of generation capacity and $9 billion in annual revenues and has over 10,000

employees. The company has a cash balance pension plan that was established in 1998 for all

new employees. Employees hired before the conversion were previously in a traditional defined

plan. The company also offers active employees a 401(k) plan with an employer match, health

insurance, and they allow retirees to remain in the company health plan.

For some years, this employer has provided day-long seminars to its retirement eligible

employees. Company personnel conduct the programs; however, several outside experts and

representatives are used to augment the program. Retirement eligible employees are invited to

attend the program; however, employees can attend a pre-retirement planning program only once

every five years. Each year, the company offers a series of programs at various sites between

July and September. In the summer of 2009, Progress Energy transitioned to providing half-day

seminars, a cost savings measure. The program content was shortened by eliminating outside

presenters, including Fidelity (the 401k provider) and the Social Security representative.

State Farm. State Farm is a large insurance company which insures more cars than any other insurer in North America and insures more homes than any other insurer in the United States.

State Farm also provides a wide array of financial products and services. State Farm employs

more than 17,000 agents and 68,000 employees in the United States and Canada.

State Farm provides regular pre-retirement planning programs to retirement eligible

employees across the country, with each region being organized at a local level. The programs

are conducted by Ernst and Young. Beginning in March 2009, State Farm used the survey

evaluation method in a sample of their programs in two geographical regions. However,

participation was low with only 88 surveys completed. Although we were not able to obtain a

count of the total number of seminar attendees receiving invitations to the survey, we

approximate the response rate was below 1% and therefore do not include these data in our

9

University of Washington. Founded in 1861, the University of Washington is one of the oldest state-supported institutions of higher education on the West Coast. The University has campuses

at Bothell, Tacoma, and Seattle and has over 30,000 employees.

The retirement plan the individual is enrolled in depends upon his job classification.

Contract classified and classified non-union employees participate in the Public Employees

Retirement System (PERS) Plan. Faculty and professional staff participate in the University of

Washington Retirement Plan (UWRP). The PERS plan has been amended over time and

currently includes three different plans, two of which continue to be open for enrollment. PERS

1 and PERS 2 require employee contributions of 6% and 3.9% of gross pay respectively and the

employee receives a pension payment which is based on years of service and final average

compensation. PERS 3 is a hybrid which combines a defined benefit account with an investment

savings account.

The UWRP plan requires employees under age 35 to contribute 5% of income while

employees over 35 are required to contribute 7.5 percent of income (employees 50 and older

have the option of increasing their contribution amount to a total of 10% of income). The

University matches 100 percent of contributions made in this plan. Enrollment is mandatory

after two years of employment. The University also has a defined benefit aspect of its savings

plan, which acts as a safety net and only pays out if the employee‟s primary savings plan, the

UWRP, fails to a reach a minimum balance. The required minimum and benefit amount due to

the employee if the minimum is not reached is determined by a complex calculation performed at the time of the employee‟s departure. Plan documents state that approximately 5% of employees

employees the option of participating in a supplemental savings plan, for which there is no

employer match. Retirees are eligible for employer sponsored health insurance.

The University of Washington does offer a limited number of seminars, but during the

time frame studied we were only able to collect a total of 22 surveys from participants. Due to

the low participation, we have chosen not to incorporate this data into our final analysis.

WakeMed. WakeMed is an 804-bed private, not-for-profit health care system based in Raleigh, NC. WakeMed employs over 7,000 workers including medical professionals, registered nurses,

medical staff, and support staff. WakeMed provides a pension to all workers age 55 and older

with at least three years of service, as long as the worker has worked the equivalent of full-time

during those three years. The pension plan allows for either a full lump sum or an annuity, with

no partial lump sum option. Retiree medical insurance is only available through COBRA for 18

months following retirement. WakeMed does allow employees to work after retirement, but

only with a break in service.

Currently, WakeMed has contracted with AIG to provide seminars lasting 75 minutes for

their employees nearing retirement. These programs focus primarily on the pension and 403 (b)

plans offered by WakeMed. Although we did distribute surveys at these short seminars,

participants were asked to mail them back and less than 10 in total we received. We did not

incorporate these data into our analysis. Because of the limited nature of these programs,

WakeMed was interested in learning more about the preferences of their employees for more

extensive programs. We sent a survey to approximately 7,700 workers, of which 2,088 were

born between 1943 and 1959 (ages 49-65), which became part of the REXS data described

11

Weyerhaeuser. Weyerhaeuser is one of the world's largest forest products companies. They have offices or operations in 13 countries and have customers worldwide. As of December 31,

2007, Weyerhaeuser had 37,900 employees, primarily in the United States and Canada. They

employ a variety of workers, from scientists, engineers, architects and financial specialists to

forestry, trade and craft workers. Weyerhaeuser offers a defined benefit pension plan that is

integrated with Social Security. The benefit formula is 1.1 percent times final average salary time

years of service plus 0.45 percent times excess earnings over the Social Security integration level

times years of service. Weyerhaeuser also offers retirees the opportunity to remain in the

company medical plan. The company offers a 401(k) plan with a $0.70 company match for each

dollar of employee contributions up to 7 percent of salary. Weyerhaeuser has offered a

pre-retirement planning program for a number of years. The company offers two and a half day

programs that are conducted by Weyerhaeuser personnel with outside experts used to

complement the program. Programs were offered approximately monthly.

Towards the end of 2009, Weyerhaeuser experienced significant lay-offs and cut-backs,

including eliminating the position of the person who ran these seminars. Although one year

follow-ups to the seminar were still conducted, we worked closely with a remaining staff

member to make sure surveys were not sent to individuals that had been laid off or fired since

attending the seminar.

The Williams Companies Inc. Williams is an integrated natural gas company that produces, gathers, processes and transports natural gas to heat homes and power electric generation across

the country. The company operates approximately 14,600 miles of interstate natural gas pipeline

30 million homes on a winter day and delivers approximately 12 percent of the natural gas

consumed in United States.

Williams offers a cash balance pension plan to its employees with company credits as a

percentage of compensation rising with age. Company contributions are greater on pay

exceeding the Social Security taxable wage base. As such, the account balances are reported in a

lump sum and not as a monthly benefit. Employees are eligible to participate in the Williams

Investment Plus Plan, a 401(k) plan, and Williams matches employee contributions dollar for

dollar up to six percent of salary. Retirees are eligible to remain in the company health plan.

Prior to the start of this project, Williams did not offer a formal pre-retirement planning

program. To assess the desire of their employees for such a program, Williams allowed us to

survey all of their retirement eligible population. There was overwhelming support from their

employees for a more comprehensive program. As a result, the HR staff developed a day-long

program and their first seminars were offered in November and December 2008. These

programs were advertised to all workers age 50 and older, to encourage large attendance.

1.3. REXS Data

The Retirement Expectations Survey (REXS) was constructed from survey responses of

employees at three of our employer-partners, BB&T, WakeMed, and Williams. Each of these

employers did not currently have a formal pre-retirement program at the time of the survey,

although WakeMed did have hour-long lunch seminars offered to all employees. All three

employers were interested in assessing the desire of workers for a more formal program.

The surveys were conducted during 2008 and 2009 via an online survey tool. Each

13

slightly between the three employers. The survey was divided into five parts: demographic and

economic characteristics of the employee, demographic and economic characteristics of the employee‟s spouse or partner, retirement plans of the worker and his/her spouse or partner,

knowledge questions, and the desire for financial education programs. The income and wealth

questions allowed the respondent to select dollar ranges rather than force them to give a specific

dollar amount. The survey contained a series of questions that tested the knowledge of the

respondent concerning the characteristics and generosity of their employer retirement programs,

Social Security, Medicare, and financial markets. The surveys were sent to all retirement

eligible employees via e-mail and they responded using an electronic survey. The responses

were completely confidential with neither the company nor the researchers able to identify the

respondents. Chapter 5 provides a detailed discussion of the REXS data and discusses findings

that highlight the importance of financial knowledge and literacy in the formulation of retirement

plans.

[Table 1.2]

1.4. PARS Data

The Participants Attending Retirement Seminars (PARS) data were constructed from

survey responses of individuals that attended a pre-retirement planning seminar offered at five of

our employer-partners. We examined the impact of pre-retirement planning programs offered by

these employers to their older employees between June 2008 and December 2009.

Typically, employers follow the same process to invite retirement-eligible employees to

participate in the programs. First, invitations are issued, then attendance is tracked and usually,

attendance rates are quite high. These programs are ongoing and the employers expect that over a

participants in the programs we observe should roughly reflect the population of older workers at

these employers on average. The financial education literature has focused in-depth on possible

selection issues associated with participation in various types of educational events. Attendance

in these programs is limited to workers with certain characteristics suggesting that one might

overstate the impact of financial education seminars if one only focuses on those who voluntarily

attend. This is exacerbated by the fact that few, if any, records of attendance are kept. By

contrast, the programs we examine are more structured; while attendance is voluntary,

employees receive specific invitations from their employers and attendance is recorded. Given

that most eligible employees attend one of these company-provided programs once they become

retirement-eligible, the selection bias should be considerably less in our study.1 Nevertheless, we only observe seminars offered between June 2008 and December 2009, thus, we do not monitor

these programs over an extended period. For this reason, it is possible that these programs may

have attracted a non-representative sample of the workforce during the 18 months of our project.

The leaders of the various employer-provided programs did not report any obvious selection bias

among the participants during the study period. Instead, they believe that most workers invited

to participate actually attend the programs and over time, all retirement eligible workers are

invited to attend one of these programs.

We worked with employers in the spring of 2008 to develop an evaluation process for

their pre-retirement planning programs. Our methodology included the development of two

surveys. Templates of these surveys are included in Chapter 6 of this report. The first survey

was to be completed by each participant prior to the start of the program. The objective was to

1

The programs offered by Weyerhaeuser, Progress Energy, and BD have been presented over a number of years. In contrast, the programs by North Carolina State and Williams are relatively new and thus a full

15

obtain baseline socioeconomic data about the individual and his/her household, as well as

information concerning retirement plans and investment strategies. Employees also completed

questions about their financial literacy and their knowledge of employer and national retirement

programs. Two financial literacy questions similar to those developed by Lusardi and Mitchell

(2006) for the Health and Retirement Study were included along with a series of knowledge

questions about Social Security, Medicare, and the characteristics of company retirement plans.

At the conclusion of the seminar, participants were asked to complete a second survey.

This time, participants answered questions concerning the program, the employee‟s assessment

of the seminar, and its value. The knowledge and literacy questions were repeated, to see if the participants‟ overall knowledge of retirement programs and financial markets had improved.

Seminar participants were also asked if they had changed any of their important retirement

related decisions. Approximately one year later, we sent a third survey to each of the

participants. The objective of this final survey was to determine the level of knowledge

retention, how retirement plans have changed, and how participants rated the programs in

retrospect. Chapter 4 discusses the findings from Survey 3.

Some of the employers used hard-copy surveys (BD, Progress Energy, and

Weyerhaeuser). The program leaders at each of these companies extended the length of their

programs to allow participants 15 to 20 minutes prior to the start of the seminar to complete

Survey One and similar time at the end of the program to complete Survey Two. Other

employers (North Carolina State University and Williams) used electronic surveys; in this case, a

link to the electronic Survey One was sent via email to participants about a week prior to the

seminar and a link to Survey Two was e-mailed to the participants immediately following the

described in this final report is based on surveys from 85 seminars that incorporated our surveys

into their programs between June 2008 and December 2009.

Table 1.3 shows the development of PARS by each employer. Seminars varied in size

and duration across the employers. During the research period, BD held 31 seminars with

approximately 500 attendees. The BD seminars were 4 hours long. Weyerhaeuser had 12

seminars that were two and half days in duration and covered 281 employees. Williams and NC

State University both had all day seminars. In 2008, the Progress Energy seminars were one day

but in 2009 the seminars had been reduced to a half-day. Thus, we were able to develop a

unique data set that included seminars ranging in length from one half day to two and half days,

seminars that took place before and during a significant economic decline and some in the early

stages of the economic recovery.

[Table 1.3]

Over the 18 months, over 1,500 individuals attended the seminars of these five

employers. We received completed responses from 1,181 for a high total response rate of 75

percent. In most of the analysis, we restrict the sample to participants born between 1943 and

1959, thus participants were approximately age 50 to 65 at the time of the seminars.2

Table 1.4 displays a summary of the PARS data. The main results show an increase in

the average knowledge score and an increase in the average expected retirement age upon

2

The age-50 restriction was applied to limit the sample to individuals approaching retirement decisions. Most of the employers only invite retirement eligible employees to these programs so, in fact, this results in only a few seminar participants being deleted from the sample. The upper age limit was applied to limit the sample to those who had not yet attained the normal retirement age for Social Security. In addition, we felt that workers over age 65 had already made the decision to delay retirement and that they would most likely have very different responses to these programs than workers age 50 to 65.

17

completing the program. The decrease in observations for knowledge score and retirement age

are due to incomplete surveys and invalid responses, as detailed in the table.

[Table 1.4]

The other chapters, particularly chapter 2, will examine the PARS data in much more

detail. Our analysis highlights four important issues concerning the effectiveness of these

programs. First, we determine whether these employees improved their basic understanding of

employer retirement programs, Social Security, and Medicare. Second, we determine whether

individuals altered their retirement plans, on the basis of the program. Third, we examine how

the participants evaluated the program. Fourth, we examine certain specific responses of

individuals concerning the use of their retirement wealth.

1.5 Outline of Final Report

The following chapters present the results of the research from this project. The three

data sets are described in more detail and the results of a series of empirical analyses are

presented. The chapters have been written so they can be read individually as stand-alone

papers, thus each chapter describes the data used in the analysis and summaries the key findings.

Chapter 2 examines the change in financial knowledge immediately before and after attendance

in a retirement planning seminar. Using data from PARS, the investigators find substantial

increases in worker knowledge and that on the basis of the enhanced financial literacy, workers

modified their retirement plans. This chapters show that workplace financial education can be

effective in increasing knowledge and that workers considered such programs a valuable

employee benefit.

Chapter 3 employees the PARS data to examine distributions from defined benefit

are asked whether they plan to accept an annuity or take a lump sum distribution from their

employer retirement plans. Once again, the evidence indicates that new knowledge leads to a

revision of retirement plans. Chapter 4 utilizes PARS3 to examine worker plans and attitudes

one year after the retirement seminar. Employees show that they have retained much of the

knowledge they learned in the retirement planning program indicating a long term benefit from

these educational events.

In Chapter 5, the REXS data are used to show the desire of older employees for employer

planning programs. Based on the strong revealed preference for such a program, one of these

employers immediately moved ahead and developed such a program and another is now in the

process of establishing a retirement planning programs for older workers. Analysis of the REXS

data revealed an interesting link between types of knowledge errors and retirement plans.

Finally, Chapter 6 contains an employer template that can be used to determine the desire of

employees for retirement planning programs when none exist and a separate template that will

aide employers who have already established programs to more effectively evaluate their

19 TABLE 1.1. Company-Specific Knowledge Questions

Employer-Partner

Lump-Sum of

Pension Health Plan

Phased

Retirement Pension Adjustments

BD Yes Yes No A. Stay the same

BB&T Yes Yes No A. Stay the same

NCSU Yes Yes No B. Increase by Inflation

Progress Energy Yes Yes N/A N/A

State Farm No Yes Yes A. Stay the same

Univ. Washington Yes Yes Yes A. Stay the same

WakeMed Yes No Yes A. Stay the same

Williams Yes Yes Yes A. Stay the same

Weyerhaeuser Yes Yes No A. Stay the same

Lump-Sum of Pension Can you take a lump sum distribution of some or all of your pension plan (do not include income for your 401(k) account)?

Health Plan Does your company offer you the opportunity to stay in the company health plan after you retire?

Phased Retirement Does your company offer any type of phased retirement, flexible work options, or the opportunity to work part-time after you retire?

Pension Adjustments The monthly pension benefit that you will receive from your current employer will:

stay the same for the rest of your life

be increased annually by the rate of inflation

be increased annually by the same rate as wages for active workers don‟t know

TABLE 1.2. Response Rate and Sample Creation REXS

BB&T WakeMed Williams

Criteria for Receiving Survey

All employees about age 55 with at least

10 years of service (the criteria for

retirement). Anyone without email access was

excluded.

All employees were sent the survey. We restricted the sample to individuals born

1943-1959.

Active employees age 50 or older.

Employees Sent Survey 2,475 approximately 7700,

2088 age 49-65 1,592 Completed a Portion of Survey 605 (Response Rate: 24%) 487 Total (6%) 237 Age 49-65 (11%) 952 (Response Rate: 60%) Born 1943-1959 572 237 915 Full Demographic Information 564 233 904 Valid Expected Retirement Age 499 187 486

21 TABLE 1.3. Construction of PARS Dataset

Employer-Partner Project Total Selected Sample Knowledge Score Retirement Age BD Seminars 31 Attendees 525 PARS 472 430 389 351

NC State Univ. Seminars 4 Attendees 151

PARS 71 71 66 64

Progress Energy Seminars 27 Attendees 333 PARS 295 277 238 156 Weyerhaeuser Seminars 12 Attendees 281 PARS 165 155 138 105 Williams Seminars 7 Attendees 314 PARS 179 169 165 162 TOTAL Seminars 85 Attendees 1,604 PARS 1,182 1,102 996 838 *Selected Sample

-Number of observations after dropping for valid age range, tenure and college responses. -2 observations lost because of invalid or missing gender responses

*Knowledge Score

-106 observations dropped because of 5 or more unanswered knowledge score questions on either the first or the last survey.

*Retirement Age

-Not all respondents gave answers for their planned retirement ages before and/or after the seminar. Also, some gave responses that were less than their current age. Respondents without a valid knowledge score were dropped. Combined, 264 observations were dropped for the expected retirement age regressions.

TABLE 1.4. Employer Means in PARS

PARS BD NCSU PGN WEY WLM

Number of Observations 1,102 430 71 277 155 169

Age 57.8 58.9 57.5 57.3 57.0 56.7

Percentage Male 56.5 43.5 31.0 81.9 69.7 46.7

Percentage Married 76.1 72.6 64.8 85.6 83.2 68.0

Years of Service 25.1 26.0 23.8 29.0 23.3 18.4

Percentage attending College 80.9 68.4 88.7 81.6 96.8 93.5 Self-Assessed Knowledge Score (1-7) 4.03 3.64 3.93 4.18 4.60 4.29

Number with Valid Knowledge Score 996 389 66 238 138 165 Knowledge Score Before (Survey 1) 5.72 5.48 3.80 6.63 7.23 4.48 Knowledge Score After (Survey 2) 6.98 6.90 4.68 7.55 9.01 5.88

Number with a Valid Planned Retirement Age 838 351 64 156 105 162 Planned Retirement Age Before (Survey 1) 62.4 62.9 58.7 62.2 61.7 63.3 Planned Retirement Age After (Survey 2) 62.7 63.1 59.0 62.3 61.8 64.2 Years from Retirement Before (Survey 1) 4.60 4.10 1.17 4.78 5.19 6.48 Years from Retirement After (Survey 2) 4.89 4.25 1.50 4.89 5.21 7.43

Notes:

-Valid knowledge score composed of participants that left no more than 5 questions blank.

-Valid planned retirement age accounts for people who filled in a planned retirement age in both Survey 1 and 2, the age was at least as much as their current age, and they had a valid knowledge score.

23

CHAPTER TWO

Can Employer-Provided Pre-Retirement Planning Seminars Increase

Financial Literacy and Retirement Preparedness?

As retirement approaches, older workers face a series of important decisions, some of

which will be irreversible. These choices will determine, in part, their income levels in

retirement, the sensitivity of their income to economic fluctuations, and their ability to maintain

consumption through retirement. To make the transition into retirement successfully, workers

must utilize their financial literacy and knowledge about retirement programs offered by

employers and the government. Without accurate information and sufficient financial literacy,

many older workers may make suboptimal employment and investment choices that will have

adverse consequences that reduce their lifetime utility. Most lifecycle models of economic

behavior assume that individuals have basic financial literacy and make resource allocation

decisions to develop saving/consumption plans along with work/retirement choices to maximize

lifetime utility.

Economists and other social science researchers have recently examined the level of

financial literacy and its role in economic decision-making. The general conclusion of this

research is that individuals have rather low levels of financial literacy and as such are likely to

make sub-optimal resource allocation decisions. A few studies have also attempted to determine

whether and how individuals can improve their knowledge base and thus increase the likelihood

that they will maximize lifetime utility. In this Chapter, we examine the retirement planning

programs offered by employers to their older employees and assess their impact on financial

increase their financial literacy and on the basis of this new information, many alter their

retirement plans. Consequently, employers can facilitate the transition into retirement by

providing the means for workers to increase their understanding of key retirement concepts,

enabling their employees to achieve a more desirable retirement. Employers have a stake in

achieving an orderly retirement process for their workers and having employees understand the

value of benefits that are part of their compensation package.

Financial literacy programs can take many forms and can occur in many different

settings. This study focuses on financial education and retirement planning programs in the

workplace. Since individuals spend substantial time at work and since much of what they need

to know to develop retirement plans is related to employer-provided benefits, the workplace

seems like an ideal setting for financial education programs. The programs that we have studied

are provided by the employer at no cost to the employee and are conducted during the workday

on company time. Among the programs we have examined, employees appreciate these

programs, are enthusiastic about attending, increase their financial literacy, and on the basis of

new knowledge many alter their retirement plans as predicted by economic theory.

2.1. Financial Literacy and Retirement Decisions

When individuals enter the labor force, they must immediately begin making important

choices about their lifetime consumption and saving profiles. Lifecycle theory suggests that

individuals set retirement goals and targets early in their careers. In order to achieve these

retirement goals, workers select saving and investment behavior consistent with their goals. As

new information becomes available, people will re-optimize their consumption and saving

patterns, and they may alter their retirement expectations using this new knowledge. The primary

25

income. A fundamental principle in retirement planning is that younger retirement ages and higher retirement incomes require more saving and less consumption throughout one‟s working

life. Younger retirement ages may require more risk-taking as well.

While considerable attention has been paid to the undersaving of American workers,

much less attention has been focused on how older workers make decisions concerning the

allocation of their resources as they enter into retirement. Workers must decide when and how to

enter into retirement, and how to best use the resources available to them. Limited available

evidence suggests that older workers do not have sufficient financial literacy needed to make the

many choices that must be made as they transition from work to retirement (Bernheim 1995,

1998; Hilgert and Hogarth 2002; Lusardi and Mitchell 2006, 2007). Incorrect or insufficient

knowledge can lead to suboptimal choices. For this reason, programs that increase financial

literacy and retirement program knowledge can improve retirement decisions and produce better retirement outcomes (Clark and d‟Ambrosio 2003; Clark et al. 2006; Lusardi 2008).

Pre-retirement planning seminars held in the workplace can efficiently address the numerous

questions that individuals approaching retirement share, thereby reducing human resources costs.

Some of the most important decisions older workers must make are:

1. What age should they retire from their career jobs?

2. When retiring from a career job, should they request a lump sum distribution from their

defined benefit plan or accept a life annuity from the plan?

3. What is the best age for the individual to start receiving Social Security benefits?

4. Should the account balances in 401(k) plans be annuitized or managed by individuals in

In making these important decisions, individuals must rely on their own financial literacy and understanding of financial mathematics, and have accurate knowledge about their employers‟

and national retirement programs. Workers can acquire the needed knowledge to make these key

decisions in various ways and one resource often available is employer-sponsored pre-retirement

planning programs.

Many large employers offer some type of planning seminar for retirement eligible

employees. Although many business leaders and analysts believe these programs are beneficial

to employees and increase their financial knowledge, relatively little formal analysis of employer

programs has been conducted. Thus, not much is known about the effectiveness of workplace

education and its ability to alter the retirement decisions of employees. To address these

important issues, we examined the pre-retirement programs of five large national employers.

The principle objective of the research is to assess whether these programs are successful in improving workers‟ knowledge as they approach retirement. We also examine whether, on the

basis of participating in a workplace educational event, employees alter their retirement plans.

Finally, we explore employee views of these programs, including whether they thought the

programs are worthwhile and whether the seminars are seen as a valuable employee benefit.

Our analysis confirms that participants believe that these programs increased their

financial knowledge and in response to enhanced financial literacy, many alter their retirement

plans. We also find that workers appreciate these programs offered by their employers.

Knowledge gained varies with age, sex, income level, education, tenure, and wealth. Participants

also reported changing retirement plans, including altering their expected retirement ages, plans

27

Employees value these programs and report that the programs enhance their opinion of their

employers.

2.2. Research Methodology

To evaluate employer-provided pre-retirement planning programs, we assembled a team

of five large employers ranging in size from 8,000 to 40,000 employees. Our employer partners

are Becton, Dickinson, and Company (BD), North Carolina State University (NCSU), Progress

Energy, Weyerhaeuser, and the Williams Companies. Four of the firms have sites throughout the

United States; their home offices are in New Jersey, North Carolina, Oklahoma, and

Washington. Each of the employers offers defined benefit plans (three employers have cash

balance plans), each offers health insurance to active and retired workers, and each offers

supplemental defined contribution plans (all but NCSU have an employer match). The employee

populations of these companies vary by gender, education, earnings, and geographic location.

We examine the impact of pre-retirement planning programs offered by these employers

to their older employees between June 2008 and December 2009. The usual process followed by

the employers is that retirement-eligible employees are invited individually to participate in these

programs by their employer: invitations are issued, attendance is tracked, and there are high

participation rates. The firms track attendance and because of the high demand by employees to

participate in the programs, several employers limit participation to once every five years or so.

These programs are on-going and the employers expect that over a number of years, most

eligible employees will attend one of these programs. Thus, the participants in the programs we

observe should roughly reflect the population of older workers at these employers on average.

The financial education literature has focused on possible selection issues associated with

characteristics might attend these programs. Thus, attendance only by persons who desired to

participate could suggest that statistical analysis might overstate the impact of financial

education seminars. Therefore, analysis of programs where attendance is voluntary and only a

small portion of the population participates could yield biased results. In contrast to past studies

of voluntary seminars or benefit fairs, the programs we examine are more structured. While

attendance is voluntary, employees receive specific invitations from their employers and

attendance is recorded. Most employees attend one of these company provided programs once

they become retirement-eligible. As a result, the selection bias should be considerably less in

our study.3 Nevertheless, we only observed seminars offered between June 2008 and December 2009, thus, we do not monitor these programs over an extended period. For this reason, it is

possible that these programs may have attracted a non-representative sample of the workforce

during the 18 months of our project. The leaders of the various employer-provided programs did

not report any obvious selection bias among the participants during the study period. Instead,

they believed that most workers invited to participate actually attended the programs and over

time all retirement eligible workers were invited to attend one of these programs.

We worked with each employer in the spring of 2008 to develop an evaluation process

for their pre-retirement planning programs. Our methodology included the development of two

surveys. The first survey was to be completed by each participant prior to the start of the

program. The objective was to obtain baseline socioeconomic data about the individual and

his/her household, as well as information concerning retirement plans and investment strategies.

Employees also answered questions about their financial literacy and their knowledge of

employer and national retirement programs. Two financial literacy questions similar to those

3

29

developed by Lusardi and Mitchell (2006) for the Health and Retirement Study were included

along with a series of knowledge questions about Social Security, Medicare, and the

characteristics of company retirement plans.

At the conclusion of the seminar, participants were asked to complete a second survey. This time, participants answered additional questions concerning the program, the employee‟s

assessment of the seminar, and its value. The knowledge and literacy questions were repeated, to see if the participants‟ overall knowledge of retirement programs and financial markets had

improved. Seminar participants were also again asked about their retirement plans, so we can

observe any changes in plans that individuals made due to the seminar. Approximately one year

later, we sent a third survey to each of the participants. The objective of this final survey was to

determine the level of knowledge retention, how retirement plans have changed, the impact of

changing economic events, and how participants rated the programs in retrospect.

Three of the employers used hard-copy surveys (BD, Progress Energy, and

Weyerhaeuser). The program leaders at each of these companies extended the length of their

programs to allow participants 15 to 20 minutes prior to the start of the seminar to complete

Survey One and similar time at the end of the program to complete Survey Two. The other two

employers (North Carolina State University and Williams) used electronic surveys; in this case, a

link to the electronic Survey One was sent via email to participants about a week prior to the

seminar and a link to Survey Two was e-mailed to the participants immediately following the

seminar. Attendees were given approximately two weeks to complete Survey Two. This

research is based on participant surveys from 85 seminars that incorporated our surveys into their

one year after their seminars, thus the surveys were sent between June 2009 and December 2010.

Survey Three was entirely electronic.

We merged the responses from the five employers into a single data set which we call

Participants Attending Retirement Seminars or PARS. Table 2.1 shows the development of

PARS by each employer. Seminars varied in size and duration across the employers. During the

research period, BD held 31 seminars with approximately 500 attendees. The BD seminars were

4 hours long. Weyerhaeuser had 12 seminars that were two and half days in duration and

covered 281 employees. Williams and NC State University both had all day seminars. In 2008,

the Progress Energy seminars were one day but in 2009 the seminars were reduced to a half day.

Thus, we were able to develop a unique data set that included seminars ranging in length from

one half day to two and half days, seminars that took place during a significant economic decline

and some in the early stages of the economic recovery. During the 18 month data collection

period, over 1,500 individuals attended the seminars of these five employers. We received

completed responses from 1,182 for a response rate of 74 percent. In most of the analysis, we

restrict the sample to participants born between 1943 and 1959, thus participants were

approximately age 50 to 65 at the time of the seminars.4 [Table 2.1]

Our analysis highlights four important issues concerning the effectiveness of these

programs. First, we determine whether these employees improved their financial literacy and

their basic understanding of employer retirement programs, Social Security, and Medicare.

4

The age-50 restriction was applied to limit the sample to individuals approaching retirement decisions. Most of the employers only invite retirement eligible employees to these programs so, in fact, this results in only a few seminar participants being deleted from the sample. The upper age limit was applied to limit the sample to those who had not yet attained the normal retirement age for Social Security. In addition,

31

Second, we determine whether individuals altered their retirement plans after participating in the

seminars. Third, we examine how the participants evaluated the program. Fourth, we examine

certain specific responses of individuals concerning the use of their retirement wealth.

2.3. Survey Design

The basic framework of each of the surveys was similar across the firms; however, some

components of the surveys were customized for each employer. The surveys mentioned the

specific employer by name, where appropriate, and people were asked about their own

employer-specific retirement benefits by name. Questions concerning retirement saving accounts

differed somewhat between private-sector versus public/ nonprofit employers (i.e., questions

concerned 401(k) plans in the private sector and 403(b) and 457 plans in the public sector). In

addition, several employers requested that specific questions be added to the survey to help them

better understand how their employees were using the human resource programs and accessing

the help lines offered by their 401(k) and 403(b) providers.

The objectives of Survey One were to determine employee understanding levels regarding their employer‟s pension and health benefits, their knowledge of national retirement

plans such as Social Security and Medicare, their financial literacy, and their current retirement

plans. To assess the current level of knowledge regarding national retirement plans, the survey

asked about Social Security early and normal retirement ages as well as early retirement

penalties, cost of living increases, and the age of eligibility for Medicare. In addition, participants

were asked benefit and eligibility questions concerning their employer defined benefit plans and

their own 401(k) or 403(b) accounts.

This survey also included several questions related to basic financial literacy. Survey One