Canadian Payroll Reporter

News February 2019 "Those are all very complicat- ed decisions for an employee to make when they really should be excited about starting their job," said Duxbury. The simplified version pre- sented information in a more straightforward way, according to the report. "In most cases, a range of con- tribution percentages was pre- sented where the contribution rate attracting the maximum em- ployer match was highlighted," it said. "The decision about which investment option to choose was also greatly simplified: new employees were informed that investments would be allocated to the plan's default fund, unless they indicated otherwise." "Employees were advised to review the other investment op- tions available and were encour- aged to assess the different op- tions based on their risk profile." The study found that employ- ees who received the simplified form or who had both the sim- plified form and encouragement to complete it on the first day of work were 24 to 25 per cent more likely to join the plan than those in the control group. They were also 29 to 30 per cent more likely to select a con- tribution rate that would maxi- mize their employer's matching contribution. "These findings suggest that simplifying the enrolment pro- cess and providing an explana- tion of employer matching leads to greater likelihood of selecting the maximizing percentage," said the report. The results should help con- vince employers to simplify their enrolment procedures and to consider suggesting a higher sav- ings rate when new employees sign up for plans, said Duxbury. Canadian employers often hesitate to suggest a starting contribution rate higher than zero per cent, she said, putting the onus on new employees to decide whether to stay with zero per cent or select a higher rate. "We often hear employers and HR professionals say they don't want to impose on employees. 'Leave it up to the employee to decide what to do.' The reality is that inertia then sets in as people don't take action." This contrasts with American employers, who often set the starting contribution rate at the amount that will attract the full employer matching contribu- tion, said Duxbury. "U.S. employers tend to be bolder when it comes to making decisions for their employees," said Duxbury. "They just tend to be more comfortable with, 'This is the right thing to do. Our employees are going to be better off.'" Employers in the U.S. also have higher plan participation rates than those in Canada, she said, hovering around 85 to 90 per cent. She attributes a key reason for the difference to the fact that U.S. employers are allowed to automatically enrol employees in their plans. "It's this concept of easy to get in, harder to get out. It takes work to get out and people just do not get around to it." In Canada, automatic enrol- ment is generally prohibited, Duxbury said. "Auto-enrolment requires changes to the Employment Standards Act because you need express consent to take money off of someone's paycheque to- day," she said. Even without automatic en- rolment, Duxbury said the study showed that encouraging em- ployees to complete enrolment forms right away could encour- age them to join an employer's retirement savings plan. She also suggested that em- ployers consider eliminating the waiting period — which can range from three months to more than a year — for new em- ployees to join their plan. "When I talk to employers, I often say, give some thought to having no waiting period and let (employees) join right out of the gate," said Duxbury. "Put yourself in the shoes of the employee: You start work- ing for this employer and you get your first paycheque and you start to adjust your standard of living to what your take-home pay is," she said. "Then, if you (the employer) come along three months or six months later and tell me that I can join the plan and I can con- tribute to that, I now need to give something up that I have been spending my money on to have money taken off of my pay. That becomes a much harder deci- sion," said Duxbury. While some employers who match employee contributions may worry that their contribu- tion costs will rise without a waiting period, she said they can always adjust when employer matching begins. "You can have the employer match start kicking in at the three-month point or you can make a retroactive contribu- tion," she said. Setting goals for the plan can also help to increase participa- tion and savings rates, according to Duxbury. "What do you want as your participation rate? What do you want the employees to have as a savings rate? If you start to set goals as an organization, they get measured," she said. "A lot of conversations focus on investment performance, but we can't control the market. We can control or influence the participation rate, the savings rate, that type of thing," said Duxbury. "Those are meaningful, tan- gible things that an employer can do that can drive very differ- ent conversations at the pension committee table." News Consider elimination of waiting period: Expert from PENSION on page 3 Published 12 times a year by Thomson Reuters Canada Ltd. 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No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, photocopying, recording or otherwise without the written permission of the publisher (Thomson Reuters, Media Solutions, Canada). Return Mail Registration # 1522825 | Return Postage Guaranteed Paid News Revenue Toronto Canadian Payroll Reporter is part of the Canadian HR Reporter group of publications: • Canadian HR Reporter — www.hrreporter.com • Canadian Occupational Safety magazine — www.cos-mag.com • Canadian Safety Reporter — www.safety-reporter.com • Canadian Employment Law Today — www.employmentlawtoday.com • Canadian Labour Reporter — www.labour-reporter.com • Canadian Payroll Reporter — www.payroll-reporter.com Automatic enrolment in company pension plans is generally prohibited in Canada.

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