A Financial Psychology Intervention for Increasing Employee Participation in and Contribution to Retirement Plans: Results of Three Trials

A Financial Psychology Intervention for Increasing

Employee Participation in and Contribution to Retirement

Plans: Results of Three Trials

Edward J. Horwitz,

Bradley T. Klontz,

and Faith Zabek

Despite decades of retirement plan enrollment meetings, many employees fail to fully engage in their

employer-sponsored retirement plans. Under the framework of the Transtheoretical Model (TTM) of Behavior

Change, this study examines the effectiveness of a financial psychology intervention designed to increase

engagement in employer-sponsored retirement plans across three employee groups: 107 employees of a regional

bank, 43 employees of a custom manufacturing company, and 48 employees of a construction company.

Following the intervention, significant changes in plan participation, contribution rates, and one-on-one

follow-up meetings with financial advisors were observed. Thirty-eight percent of previously unengaged

employees became plan participants, 68% requested and held meetings with financial advisors, and contribution

rates increased by 39%, resulting in a total $199,445 increase in first-year annualized contributions and

employer matching funds across the three groups.

Keywords: behavioral finance, employee engagement, financial psychology, money scripts, retirement plan

meeting, Transtheoretical Model of Behavior Change

or many Americans, the thought of planning for

retirement is a source of anxiety, confusion, and

frustration. Accurate calculations of needed retire-

ment saving levels are among the most financially com-

plex Americans will encounter (Bayer, Bernheim, & Scholz,

2008). There is a widely held perception among finan-

cial service companies that people behave in ways that are

counter-productive to achieving financial success primar-

ily due to a lack of financial literacy (e.g., knowledge of

finances and savings). There is some evidence that financial

education programs that provide information about finan-

cial basics (e.g., budgeting, the importance of saving, vari-

ous savings vehicles) can have a positive impact on financial

literacy and financial behaviors (Horwitz, 2015; Huston,

2010; Walstad et al., 2017; Xiao & O’Neill, 2016). How-

ever, the field of behavioral finance has shown that this is

not always the case (Fernandes, Lynch, & Netemeyer, 2014;

Martin, 2007; Miller, Reichelstein, Salas, & Zia, 2015).

For example, the primary financial behavioral problems in

America are overspending and a lack of savings, behaviors

that are well known to be problematic, and are not solely the

result of a lack of financial literacy (Klontz & Klontz, 2009).

Behavioral finance offers a variation from foundational

standard finance theories by introducing the recognition

that investors are affected by emotions and cognitive biases

that override rational decision-making processes (Statman,

2008). A variety of cognitive and emotional considera-

tions distract from pure market forces, which other the-

ories propose are the principal concern of the rational

investor (Shefrin & Statman, 1984). These distractions,

for example, can come from beliefs and desires for sta-

tus or social responsibility over wealth and can result in

maladaptive financial beliefs and self-destructive financial

Mutual of Omaha Executive Director in Risk Management, Director of Programs in Financial Psychology and Behavioral Finance, Associate Professor of

Practice, Department of Economics and Finance, Creighton University, Heider College of Business, 2500 California Plaza, Omaha, NE 68178.

E-mail: EdwardHorwitz@Creighton.edu

Associate Professor of Practice, Department of Economics and Finance, Creighton University, Heider College of Business, 2500 California Plaza,

Omaha, NE 68178. E-mail: [email protected]

Ph.D. Candidate, Georgia State University, 3841 Haulani Place, Princeville, HI 96722. E-mail: [email protected]

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262 Journal of Financial Counseling and Planning, Volume 30, Number 2, 2019, 262-276

http://dx.doi.org/10.1891/1052-3073.30.2.262

behaviors (Klontz & Klontz, 2009). Thus, many financial

decisions are made based on individuals’ underlying beliefs

about money, which may or may not be correct. Klontz

and Klontz (2009) described these beliefs as money scripts,

which are the subconscious beliefs individuals hold about

money, learned in childhood, that drive financial behaviors.

It is hypothesized that many of these beliefs are so deeply

held that many people go through life without ever examin-

ing them (Klontz & Klontz, 2009). Confirmation bias then

leads individuals to search for and interpret information that

reinforces these beliefs (Nickerson, 1998). The combina-

tion of cognitive biases and inaccurate beliefs about money

can limit the effectiveness of traditional financial education

efforts in changing financial behaviors. The present study

explores the effectiveness of a financial psychology inter-

vention designed to motivate employees to save more in

their employer sponsored retirement plan.

Traditional Approaches for Increasing Savings

Workplace Financial Education

Early workplace financial education began in earnest in the

1980s when employers began offering educational programs

designed to increase financial literacy and employee contri-

butions (Bernheim & Garrett, 2003). Traditional workplace

financial education programs aim to increase knowledge of

financial planning basics by providing information on the

financial planning process, the importance of saving, and

various savings vehicles. The United States has spent over

$670 million in financial education training programs for

consumers (Consumer Financial Protection Bureau, 2013).

Employer financial education is regarded among employees

as a primary source of information, authority, and advice on

retirement planning (Bernheim & Garrett, 1996).

Yet, despite decades of education-based employer retire-

ment plan enrollment meetings, many employees fail to

fully engage in their employer-sponsored retirement plan,

which includes minimal improvement in the voluntary sav-

ings rates of employees. This is true even after account-

ing for the effects of the Pension Protection Act (PPA) of

2006, which introduced multiple safe harbors to automat-

ically enroll employees, increase an employee’s deferral

rate, and place the employee’s assets into a predetermined

Qualified Default Investment Alternative (QDIA) (Munnell,

2012). The use of traditional workplace financial education

programs to improve outcomes such as financial behaviors,

plan participation, and contribution rates has not been con-

sistently supported by research and has often led to disap-

pointing results (Benartzi & Thaler, 2007; Fernandes et al.,

2014; Martin, 2007; Miller et al., 2015).

Automatic Enrollment in Retirement Plans

Automatic enrollment provisions attempt to address the

problem of lack of employee engagement by taking an

opt-out approach to retirement plan participation. Auto-

matic enrollment is based on the concept of status quo bias,

which assumes that when people are faced with a variety

of choices, they are inclined to extend the current condi-

tion versus changing (Samuelson & Zeckhauswer, 1988). In

other words, individuals are likely to take the path of cogni-

tive least resistance.

Initially, 401(k) automatic enrollment systems were show-

ing signs of success (Gale, Iwry, & Orszag, 2005; Van-

Derhei, 2010); however, these trends were later reversed in

light of the 2008 financial crisis and recession. Despite the

greater number of enrollments resulting from the PPA of

2006, contributions decreased, cash-out hardship plan with-

drawals increased, and the resulting median 401(k)/IRA bal-

ances have changed little since 2007 (Munnell, 2012). Even

when automatic enrollment plans are in place, default con-

tribution rates fail to take advantage of the full employer

match (U.S. Bureau of Labor Statistics, 2015). Contribut-

ing at the level needed to receive the full employer match

is considered to be one of the most basically recommended

retirement behaviors for everyone except the most impatient

or financially constrained households (Benartzi & Thaler,

2007).

Perhaps even more concerning is the lack of evidence sup-

porting a connection between the money that employees

save in their retirement plan through automatic enrollment,

their retirement goals, and their subsequent financial behav-

iors. For example, without a conscious commitment to

retirement planning, when automatically enrolled employ-

ees realize they have amassed a meaningful balance in their

plan, they may take a loan out against it or take a full or

partial distribution to meet current spending desires. While

longitudinal studies are needed to confirm the increased

loans from auto-enrolled employees, anecdotal evidence

from pension plan providers show clear indication of this

financial behavior occurring.

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Journal of Financial Counseling and Planning, Volume 30, Number 2, 2019 263

Financial Psychology

Given the limitations of traditional workplace financial edu-

cation programs and automatic enrollment in retirement

plans, there is a need for a more encompassing, effec-

tive framework for efforts to improve financial behaviors.

To increase the success of financial behavior interven-

tions, it is critical that such efforts consider what motivates

individuals to follow through on recommendations for

financial action or change. Financial psychology draws on

psychological theories related to the process of change

in order to tailor interventional approaches that success-

fully motivate financial action. The Transtheoretical Model

(TTM) of Behavior Change (Prochaska, DiClements, &

Norcross, 1992; Prochaska, Norcross, & DiClemente, 1994)

has been found to be applicable to such efforts (Gutter, Hay-

hoe, & Wang, 2007; Kerkmann, 1998; Shockey & Seiling,

2004; Xiao, Newman, et al., 2004; Xiao, O’Neill, et al.,

2004) and may provide an effective theoretical foundation

for a framework to improve retirement savings behaviors.

The TTM of Behavior Change may be utilized as an

approach to motivate changes in savings behavior. This

model categorizes behavior change into five stages (i.e.,

Precontemplation: unaware of problem and not intending

behavior change; Contemplation: recognize problem and

considering behavior change; Preparation: preparing for

behavior change; Action: implementing behavior change;

and Maintenance: maintaining behavior change) through

which individuals “spiral” as they implement lasting behav-

ior changes. Each stage requires different intervention tech-

niques to successfully motivate change (Prochaska et al.,

1992, 1994). For example, those in the Precontemplation

stage may be more motivated by an emphasis on better

understanding the benefits of participating in a retirement

plan, while those in the contemplation stage may be more

motivated by an emphasis on decreasing the negatives of

participating in a retirement plan. It is important that inter-

ventions aimed at improving financial behavior recognize

that participants may be in various stages of change and

include a variety of techniques that may be most effective at

moving individuals into the action stage and motivating pos-

itive financial change (Klontz, Horwitz, & Klontz, 2015).

Stages of Change and Employee Engagement in

Retirement Plans

Employees have different levels of engagement in their

employer-sponsored retirement plans. Engagement can vary

from no participation at all to full participation. The TTM

(Prochaska et al., 1994) can assist intervention efforts in

motivating participant behavior change, thus moving them

toward higher levels of engagement. The authors opera-

tionalized these levels of engagement into a hierarchy to

assist in the development of effective, individualized finan-

cial psychology interventions. What follows are three levels

of employee engagement in employer-sponsored retirement

plans, which include: (a) actively engaged (AE) employees,

(b) partially engaged (PE) employees, and (c) unengaged

(UE) employees. While it is important to note that these

classifications are inevitably not mutually exclusive, for the

sake of clarity, each is summarized in the Horwitz Klontz

Employee Retirement Engagement Hierarchy (Figure 1).

Actively Engaged

A subset of employees participate in meetings, hold follow-

up one-on-one meetings with financial advisors, set proper

savings levels, and actively review their statements and

investment allocations. These individuals are referred to

as AE employees. AE employees are motivated to partic-

ipate in retirement plans and may be considered within

the action or maintenance stages of change. AE employee

behaviors are represented at the top level of the employee

retirement engagement hierarchy. What distinguishes AE

employees from other employees is their proactive partici-

pation in their employer-sponsored retirement plan toward

the achievement of their retirement goals. As they relate to

the study hypotheses, AE employees would be contributing

to their employee sponsored retirement plan, would be ben-

efiting from the full employer match, and would be actively

engaged in financial planning.

Partially Engaged

Another segment of employees may attend mandatory meet-

ings but do not fully engage at these meetings and may not

be concerned about or understand what is being presented.

As such, they miss out on opportunities to actively engage in

their retirement planning. These employees may contribute

minimally to the retirement plan and may receive some

of the employer matching contributions. These employees

are referred to as PE, and are represented in the middle of

the employee retirement engagement hierarchy. PE employ-

ees are somewhat motivated to participate in retirement

plans but may be considered within the preparation stage

of change. PE employees lack the connection to individual

retirement goals to label them as AE’s and may struggle to

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264 Journal of Financial Counseling and Planning, Volume 30, Number 2, 2019

Figure 1. The Horwitz Klontz employee retirement engagement hierarchy.

Review,

manage, adjust,

retirement assets

Self-enroll, investments

and contribution levels based

on retirement planning calculations

Establish needed systematic

savings levels and investment allocations

Calculate needed retirement

Income and savings for desired lifestyle

Meet 1:1 with retirement advisor

Participate to receive full ER matching contributions

Participate below full ER matching contributions, but above

auto-enrollment or plan m

inimum participation levels

Attend optional retirement plan meeting

Participate at retirement plan minimum levels, or

do not opt out of auto-enrollment if offered

Does not attend (or engage at) retirement plan enrollment meeting

Does not participate in the employer-sponsored retirement plan

conceptualize their retirement and avoid thoughts of retire-

ment planning. Both AE and PE employees are conceptu-

alized to be in the Action or Maintenance stage of change

with regard to plan engagement, but they may be spiraling

through the Precontemplation, Contemplation, or Prepara-

tion stages with regard to contributing more to their retire-

ment plans. Thus, intervention efforts should focus both on

maintaining engagement and on motivating action to engage

more.

Unengaged

According to the U.S. Bureau of Labor Statistics (2015),

approximately 23% of employees who have access to

employer sponsored retirement plans do not participate

at all. This third group of employees was referred to as

“UE”, and represents the bottom of the employee retire-

ment engagement hierarchy. UE employees require further

motivation to participate in retirement plans and may be

considered within the Precontemplation or contemplation

stages of change. Employees may not attend enrollment

meetings, unless mandatory, and do not actively or even par-

tially engage in the retirement meetings or contribute to the

retirement plan. UE employees are conceptualized to be in

the Precontemplation, Contemplation, or Preparation stage

with regard to contributing to their retirement plans. Thus,

intervention efforts should focus on motivating employees

to start actively engaging in retirement planning.

This study seeks to better understand how financial psychol-

ogy theory and techniques may motivate employees across

various stages of change to increase their engagement in

an employee-sponsored retirement plan. Instead of using

the typical retirement planning meeting tools of financial

education—an introduction to online resources, recom-

mendations to meet with advisors, and information on

investments—this intervention was designed to address the

employee’s unique money scripts, values, goals, and moti-

vation toward change. The researchers hypothesized that

those employees who have traditionally failed to engage in

retirement planning can be motivated to take recommended

financial action through a financial psychology informed

intervention.

Research Hypotheses

The purpose of the present study was to examine the

effectiveness of a financial psychology intervention at a

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Journal of Financial Counseling and Planning, Volume 30, Number 2, 2019 265

retirement plan meeting for increasing employee engage-

ment in employer-sponsored retirement plans. The fol-

lowing research hypotheses were examined. Following a

financial psychology intervention

H1: There will be a statistically significant increase

in the number of employees who contribute to their

company-sponsored retirement plan (i.e., Those

who are classified as AE or PE versus UE).

H2: There will be a statistically significant increase

in the overall contribution employees make to their

company sponsored retirement plan

H2a: There will be a statistically significant

increase in the contribution engaged

employees (AE and PE) make to their

company sponsored retirement plan.

H2b: There will be a statistically significant

increase in the contribution UE employees

make to their company sponsored retirement

plan.

H3: There will be a statistically significant increase

in the number of employees who are contributing

at least the minimum required to receive full

employer match when available.

H4: There will be a statistically significant increase

in the number of employees who request and

attend follow-up one-on-one meetings with an

advisor.

Method

The present study utilized convenience sampling to deter-

mine the three participant groups. The samples available for

the study were chosen because they were the plan sponsor’s

next three groups, which the plan sponsor had taken over

from a previous provider. The three employee groups were

comprised of 107 regional bank employees, 43 employees

of a manufacturing business, and 48 employees of a con-

struction company, all of whom had the option to participate

in a traditional 401(k) plan without an auto-enrollment pro-

vision. The bank employees’ plan included 6% dollar-for-

dollar employer matching contributions for participants; the

construction company offered 5% dollar-for-dollar match-

ing employer contributions; while the manufacturing busi-

ness offered no matching employer contributions.

The retirement plan intervention meetings were conducted

for the employees of these companies, and the data received

from those meetings served as the basis for these stud-

ies. The impetus for the company meeting was the chang-

ing of the employer’s retirement Plan Sponsor. All eligible

employees were required to attend an informational meet-

ing regarding a new plan and provider and to receive enroll-

ment instructions for signing up or making changes in one’s

current participation. This required meeting provided a real-

world laboratory to study the effectiveness of a financial

psychology intervention on the behaviors of employees fol-

lowing the enrollment meeting.

Measures

The Klontz Money Script Inventory-Revised (KMSI-R).

The KMSI-R was used to assess money beliefs (Klontz,

Seay, Sullivan, & Canale, 2014; Taylor, Klontz, & Britt,

2015). The KMSI-R consists of four distinct categories

of money beliefs, including money avoidance, money sta-

tus, money worship, and money vigilance. Prior research

has found significant associations between these scales

and financial health indicators such as income, net worth,

revolving credit, money disorders, and tendency to engage

in risk planning (Britt, Klontz, Tibbetts, & Letiz, 2015;

Klontz, Britt, Mentzer, & Klontz, 2011). These distinct

money script profiles have also been found to predict

self-destructive financial behaviors including overspending,

financial enabling, financial dependence, and gambling dis-

order (Klontz & Britt, 2012).

Plan Participation. An indication of employee engagement

is whether or not they enroll in the plan and participate.

Employee engagement was measured by plan participation,

defined as the percentage of eligible employees who are par-

ticipating in the retirement plan with any level of voluntary

contributions from salary. Plan participation was recorded

based on evidence of enrollment and salary deferral elec-

tion. Participants were coded on a dichotomous scale where

0 = no participation and 1 = employee participation in the

retirement plan.

Contribution Rates. Salary deferral rates, also known as

contribution rates, are an important indicator of employee

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engagement in employer-sponsored retirement plans. In

order to receive the full employer match, bank employees

in the first sample would need to contribute at least 6% of

their salary to the company’s retirement plan. This would

represent an immediate 100% return on their investment and

is recommended by most financial professionals. Regard-

less of whether or not this benchmark is reached for an

employee, an increase in employee contribution rates also

suggest that an employee has greater motivation to save for

retirement, as this comes at a direct cost to funds available

for immediate spending.

Contribution rates were tracked in four ways: (a) as percent-

ages of salary before and after the intervention for already

participating employees, (b) as percentages of salary before

and after the intervention for previously eligible but non-

participating employees, (c) as the percentages of salary

before and after the intervention for the eligible employees

in the group, and (d) as participation sufficient to receive the

full employer match. Percentage of salary contributed was

treated as a continuous variable, and eligibility for employer

match (when available) was coded on a dichotomous scale

where 0 = full employer match not received and 1 = full

employer match was received. Researchers measured each

participant’s plan payroll contributions the month before the

Plan Sponsor took over the plan, and then at the next pay-

roll which was approximately 30 days after the plan was

switched over to the new provider.

Follow-up Meetings. One of the goals of a retirement

plan meeting is to encourage interested employees to sign-

up for a follow-up one-on-one meeting with a finan-

cial advisor. In this meeting, the financial advisor will

typically measure the client’s risk tolerance, discuss retire-

ment goals, and recommend savings percentages, appro-

priate investments, and asset allocations. An important

measure of employee engagement is the number of employ-

ees who request and attend a one-on-one meeting with an

advisor after an employer retirement plan meeting. The plan

sponsor estimates that in their typical retirement plan meet-

ing, no more than 25% of employees will voluntarily request

a follow-up one-on-one meeting with a financial advisor.

This estimate is consistent with the research on change,

which has shown that around any given issue approximately

20% of individuals are ready to take action toward change

(Prochaska et al., 1994). Some employees may not need

a one-on-one meeting with an advisor affiliated with an

employer-sponsored plan. For example, an employee may

be engaging in financial planning with an independent advi-

sor or may be otherwise fully engaged in their retirement

plan. As such, this measure may underestimate the number

of engaged employees. However, a change in the typical

requests for a one-on-one follow-up meeting with an advisor

is thought to be a valid indicator of a change in engagement

at the group level and was included in this analysis. Follow-

up meeting participant requests were coded on a dichoto-

mous scale where 0 = no meeting requested and 1 = meeting

requested. In the same manner, attendance at the scheduled

meeting was recorded as 1 and cancellation or no show was

recorded as 0.

Participants

A group of 107 regional bank employees participated in

Sample 1’s financial psychology retirement plan meeting.

The sample was skewed toward males (74%), and married

individuals (81%), with an average age of 47. The group

had an average annual salary of $45,892 (median $28,700),

and an average 401(k) account balance of $107,403 among

active participants. In Sample 2, a group of 43 employees

(83.7% male, 62.8% married, average age = 44) of the cus-

tom auto manufacturing business participated in the finan-

cial psychology retirement plan meeting. The group had an

average salary of $42,495 (median $40,000), and an aver-

age 401(k) account balance of $35,291 among active partic-

ipants. A group of 48 employees (94% male, 53% married,

average age = 38) of a construction business participated

in Sample 3’s financial psychology retirement plan meet-

ing. The group had an average salary of $56,420 (median

$44,200) and an average 401(k) account balance of $30,851

among active participants. Many of the eligible employees

represented in Sample 3 had been hired within the past 3

to 4 years and as a group were younger than the other two

groups. As a result, their average 401(k) balance was lower

than the other groups, as they had less time to accumulate

contributions and growth. Tests of mean differences showed

that the groups differed significantly with regard to age, gen-

der, marital status, and preintervention average 401(k) bal-

ances. An overview of the demographic characteristics of

participants from each sample can be found in Table 1.

Procedures

Preintervention Procedures. Working with the Plan

Sponsor’s Retirement Services division, the researchers

formed a team to tailor and evaluate a financial psychology

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Journal of Financial Counseling and Planning, Volume 30, Number 2, 2019 267

TABLE 1. Demographics

Variable Sample 1 Sample 2 Sample 3 Statistics

Age (mean) 47 44 38 F(2,197) = 6.214, p = .002

Gender X

(2, N = 198) = 82.777, p = .000

Male 79 (73.8%) 36 (83.7%) 46 (95.8%)

Female 28 (26.2%) 7 (16.3%) 2 (4.2%)

Marital Status X

(2, N = 198) = 12.322, p = .002

Married 86 (80.4%) 27 (62.8%) 26 (54.2%)

Single/Widow 21 (19.6%) 16 (37.2%) 22 (45.8%)

Salary (mean/median) $45,893/$28,700 $42,496/$40,000 $56,420/$44,200 F(2,197) = 2.379, p = .095

401(k) Balance (avg) $107,403 $35,219 $30,851 F(2,197) = 3.269, p = .033

retirement plan meeting intervention, which consisted of

four managers and five staff members. The team was repre-

sented by a cross-section of disciplines and skills within the

insurance organization. The lead author directed the team

and facilitated the development of the company-specific

intervention within the context of the plan sponsor’s clien-

tele and outcome goals. The team was educated on financial

psychology and change theory, money scripts, and building

intrinsic motivation for change using a variety of applied

exercises. The training program consisted of approximately

8 hours of reading materials and 6 hours of didactic instruc-

tion and group discussion. Group discussion was used as an

informal measure of knowledge acquisition.

Using the KMSI-R, the team created hypothesized seg-

mented employee groups, using financial psychology

profiles, based on the plan sponsor’s typical client employ-

ees. Based on specific items from the KMSI-R, the

team grouped several questions together to form a col-

lection of money belief statements. This collection of

statements was then used to create several straw cus-

tomers, which represented groups of employees with sim-

ilar financial beliefs and behaviors. These groups were

identified and named by the representative straw cus-

tomer profiles based on the team’s knowledge of their cus-

tomers and included information such as sample names,

gender, ages, and financial beliefs. Five team members

then conducted independent, one-on-one, face-to-face inter-

views with a total of 75 market representative employ-

ees and listened for specifically identifying KMSI-R

statements. Based on these interviews, the team fur-

ther refined these straw customer profiles and associated

them into AE, PE, and UE employee groups according

to the Horwitz Klontz Employee Retirement Engagement

Hierarchy. Because the predata for the groups were not

provided from the employer and previous plan sponsor,

the information needed to distinguish between PE and AE

was unavailable. Therefore, as mentioned earlier, participa-

tion was used to separate the engaged (AE and PE) from

the UE, and results were reported as such. Additionally,

since personally identifiable data was not available, it was

not possible to determine if the AE behaviors within the

group represented a change within the individual or not. In

future research, having the ability to ask questions of plan

participants to determine their specific level of engagement

(AE or PE) pre and post intervention, would facilitate a

richer level of analysis. These profiles were then used to

develop targeted messaging intended to resonate and moti-

vate each group of employees, under the specific direction

of the researchers. Special attention was given to the optimal

financial psychology interventions for PE and UE employ-

ees to enhance their receptivity to thinking about and plan-

ning for retirement.

The financial psychology retirement plan meeting interven-

tion was uniquely designed to match the needs and goals of

the plan sponsor’s retirement services division. The inter-

vention was designed to motivate employees to identify,

challenge, and change their beliefs about money and retire-

ment, and also motivate them to take positive financial

action in their employer-sponsored retirement plan.

The intervention drew techniques from experiential finan-

cial therapy (Klontz, Bivens, Klontz, Wada & Kahler, 2008;

Klontz, Klontz, & Tharp, 2016), cognitive behavioral finan-

cial therapy (Nabeshima & Klontz, 2015), motivational

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interviewing (Horwitz & Klontz, 2013; Klontz, Horwitz,

& Klontz, 2015; Klontz, Kahler, & Klontz, 2016; Miller

& Rollnick, 2002), and solution-focused financial therapy

(Archuleta, Grable, & Burr, 2015; de Shazer et al., 2007;

Nichols & Schwartz, 2001). Furthermore, the intervention

was designed to target the financial psychological needs

of these unique segmented employee groups. A guided

imagery exercise was utilized for employees to create an

ideal vision for retirement. Participants were provided with

the opportunity to create a visual representation of their

desired retirement lifestyle. The financial psychology retire-

ment meeting intervention was designed to replace a stan-

dard 60-minute employee benefits presentation.

The intervention was delivered to all three groups in a sim-

ilar fashion. For all samples, information on the actual rates

of plan participation and preintervention contribution rates

were obtained from the previous pension administrator. The

participant information was captured prior to the retirement

plan sponsor take over, and in the month following the finan-

cial psychology intervention meeting when the payroll con-

tribution figures were provided to the new plan sponsor.

Changes in participation rate, contribution rates, and num-

ber of employees requesting and holding follow-up meet-

ings were provided by the employer. Employees who were

participating prior to the intervention were labeled AE and

PE and those not participating were labeled UE.

Sample 1 Procedures. The first employer group consisted

of 107 employees eligible to participate in the plan. The

employer offered matching contributions for plan partici-

pants, with a dollar-for-dollar match up to 6%. This inter-

vention was conducted like a typical enrollment meeting and

was delivered by the company presenter who was a member

of the development team. The same company presenter was

used for each sample. Data was collected on the employee

group and all attendees prior to the meeting, and resulting

financial behaviors were captured after the intervention as

well. Employees who were participating prior to the inter-

vention were labeled AE and PE and those not participating

were labeled UE. A summary of eligible employees, pre-

and post-intervention, from all three studies can be seen in

Table 2.

Sample 2 Procedures. A second employer group was tested

using the same intervention meeting materials and facilita-

tion personnel. This group was comprised of 43 employees

in the custom auto manufacturing business. The manufac-

turing employer did not offer matching contributions for

plan participants. The employer had recently established an

Employee Stock Option Plan (ESOP) for employees and

had ceased making matching contributions to their exist-

ing 401(k) plan. For this reason, the intervention for this

group was primarily focused on increasing plan participa-

tion among currently UE employees as the primary measure

for engagement. This study also differed by not measuring

the number of employees who contributed enough to receive

the employer match, given there was no employer match in

the retirement program.

Sample 3 Procedures. The third employer group was tested

using the same intervention meeting materials and facilita-

tion personnel. This group was comprised of 48 employ-

ees in a construction business. Similar to Sample 1, the

construction employer offered matching contributions for

plan participants, with a dollar-for-dollar match up to 5%.

The intervention for this group was focused on increas-

ing plan participation among currently UE employees,

increasing contribution rates, and increasing requests for

one-on-one meetings with an advisor.

Results

Approach to Data Analysis

Data analysis of the outcome measures consisted of either:

(a) repeated measures ANOVA examining the effect from

pre- to post-intervention with continuous data, (b) related-

samples exact McNemar Tests for examining the effects

from pre- to post-intervention with binary data, and (c)

binomial tests of significance for single-sample binary data

with hypothesized values. A .05 level of significance was

adopted for all tests. Effect sizes were computed as partial

eta squared values for ANOVAs. Table 3 shows the results

of samples 1, 2, and 3.

Sample 1: Regional Bank

Plan Participation. Prior to the plan sponsor taking over

the retirement plan, there were 75 employees participating

in the 401(k) plan (70%) out of the 107 eligible employees.

Following the intervention, 17 of the 32 nonparticipants

enrolled in the plan, while only 1 of the 75 participants

ceased contributions. Thus, total participation in the plan

increased from 70% to 85%, a 21% overall increase in

plan participation, and a 50% decrease in nonparticipation.

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Journal of Financial Counseling and Planning, Volume 30, Number 2, 2019 269

TABLE 2. Employee Engagement

Sample 1 (N = 107) Sample 2 (N = 43) Sample 3 (N = 48) Total (N = 198)

Pre

AE/PE 75 (70%) 16 (37%) 21 (44%) 112 (57%)

UE 32 (30%) 27 (63%) 27 (56%) 86 (43%)

Post

AE/PE 91 (85%) 26 (60%) 28 (58%) 148 (75%)

UE 16 (15%) 17 (40%) 20 (42%) 53 (27%)

Change

UE to AE/PE 16 (15%) 10 (23%) 7 (15%) 33 (17%)

Note. AE = actively engaged; PE = partially engaged; UE = unengaged.

TABLE 3. Results for the Within Group Comparisons

Variable Sample 1 Sample 2 Sample 3

Participation

Pre (n) 75 (70%) 16 (37%) 21 (44%)

Post (n) 91 (85%)

***

26 (60%)

28 (58%)

Contribution % (preintervention participants)

Pre (M/SD) 7.48% (5.17%) 6.75% (5.40%) 6.14% (2.33%)

Post (M/SD) 9.13% (5.91%)

***

6.93% (5.31%) 6.86% (2.63%)

***

Effect Size 0.349 0.157 0.879

Contribution % (preintervention nonparticipants)

Pre (M/SD) 0% 0% 0%

Post (M/SD) 2.97% (3.25%)

***

1.52% (2.34%)

1.30% (2.38%)

Effect Size 0.463 0.304 0.235

Contribution % (combined)

Pre (M/SD) 5.24% (5.52%) 2.51% (4.62%) 2.69% (3.43%)

Post (M/SD) 7.29% (5.96%)

***

3.53% (4.52%)

3.73% (3.72%)

***

Effect Size 0.374 0.215 0.200

Full Employer Match

Pre (n) 50 N/A N/A

Post (n) 69

***

N/A N/A

One-on-one Meetings 71%

***

53%

***

73%

***

p < .05.

p < .01.

***

p < .001.

A related-samples exact McNemar Test indicated that this

result was statistically significant at p < .001.

Contribution Rates. Prior to the intervention, the average

employee retirement plan contribution for the 75 employ-

ees, as a percentage of salary, was 7.48%. Following

the intervention, the average amount of retirement plan

contribution for those same 75 employees increased to

9.13%, representing an increase of 22%. A repeated mea-

sure ANOVA indicated that these changes were statisti-

cally significant F(1,74) = 39.612, p < .001, partial eta

squared = .349.

Following the intervention, the UE group as a whole

increased their contribution percentage from 0% to 2.97%

(F(1,31) = 26.739, p < .001, partial eta squared = .463). The

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270 Journal of Financial Counseling and Planning, Volume 30, Number 2, 2019

17 new participants from the prior group of 32 UE employ-

ees decided to contribute an annual average of 5.59%.

The average contribution rate for all previously eligible

employees increased from 5.24% to 7.29% (39%) after

the intervention (F(1,106) = 63.455, p < .001, partial eta

squared = .374).

Prior to the intervention 50 of the 75 participating employ-

ees (66.7%) contributed at the 6% level or above and

received the full benefit of the employer match. After the

intervention, this number increased to 69 of these 75 par-

ticipating employees (92%) contributing at the 6% level or

above and receiving the full employer match. This repre-

sented a 25.3% increase, and a related-samples exact McNe-

mar Test determined that these changes were a statistically

significant at p < .001.

Follow-up Meetings. After the intervention, 76 of 107

employees requested a follow-up one-on-one meeting with

a financial advisor to discuss retirement planning, an overall

rate of 71%. A binomial test showed a statistically signifi-

cant difference (p < .001) between the proportion of employ-

ees who requested a one-on-one meeting (71%) and the

previous rate reported by the company (25%). Table 1 shows

the results of the trials from the perspective of the Horwitz

Klontz Hierarchy of Employee Engagement.

Sample 2: Manufacturing Group

Plan Participation. Prior to the intervention meetings, 16

of the 43 (37.2%) employees were participating in the

employer retirement plan. Following the intervention meet-

ings, there were 26 of the 43 employees who were enrolled

in the plan (60.5%). The change of 10 new engaged employ-

ees who enrolled following the intervention meetings rep-

resents a 62.5% increase in employee plan participants

(p < .002).

Contribution Rate. Prior to the intervention, the average

employee retirement plan contribution for the 16 employees,

as a percentage of salary, was 6.75%. Following the inter-

vention, the average amount of retirement plan contribution

for those same 16 employees increased to 6.93%. A repeated

measure ANOVA indicated that these changes were not sta-

tistically significant.

Following the intervention, the UE group as a whole

increased their contribution percentage from 0% to 1.52%

(F(1,26) = 11.340, p < .002, partial eta squared = .304). The

10 new participants from the prior group of 27 UE employ-

ees decided to contribute an average annual contribution

of 4.1%. The average contribution rate for all previously

eligible employees increased from 2.51% to 3.53% (41%)

after the intervention (F(1,42) = 11.494, p < .002, partial eta

squared = .215).

Follow-up Meetings. Following the intervention, 23 of the

43 employees requested a one-on-one meeting with a finan-

cial representative to discuss their retirement planning and

enrollment. All of the 23 employees who met with the

financial advisor subsequently enrolled in the retirement

plan, and two employees who attended the intervention but

did not meet with an advisor, also enrolled in the plan.

A binomial test showed a statistically significant difference

(p < .001) between the proportion of employees who

requested a one-on-one meeting following the intervention

(53%) and the previous rate reported by the company (25%).

Sample 3: Construction Company

Plan Participation. Prior to the plan sponsor taking over

the retirement plan, there were 21 of 48 (43.7%) eligible

employees participating in the 401(k) plan. Following the

intervention, 7 of the 27 nonparticipants enrolled in the plan,

and all 21 prior participants persisted with the new plan.

Thus, total participation in the plan increased from 21 to 28

participants (58.3%), a 33% overall increase in plan partic-

ipation, and a 26% decrease in nonparticipation (p < .016).

Contribution Rates. Prior to the intervention, the average

employee retirement plan contribution for the 21 previ-

ously participating employees, as a percentage of salary,

was 6.14%. Following the intervention, the average amount

of retirement plan contribution for those same 21 employ-

ees increased to 6.86%, representing an increase of 11.7%

(F(1,20) = 145.268, p < .001, partial eta squared = .879).

Following the intervention, the UE group as a whole

increased their contribution percentage from 0% to 1.3%

(F(1,26) = 7.99, p < .009, partial eta squared = .235). The 7

new participants from the prior group of 27 UE employees

decided to contribute an annual average of 5%. The aver-

age contribution rate for all previously eligible employees

increased from 2.69% to 3.73% (39%) after the intervention

(F(1,47) = 11.774, p < .001, partial eta squared = .200).

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Journal of Financial Counseling and Planning, Volume 30, Number 2, 2019 271

Prior to the intervention all 21 of the participating employ-

ees (100%) contributed at the 5% level or above and

received the full benefit of the employer match. Following

the intervention, all 21 continued to contribute at or above

this level.

Follow-up Meetings. After the intervention, 35 of the 48

attendees requested a follow-up one-on-one meeting with a

financial advisor to discuss retirement planning, an overall

rate of 73%. A binomial test showed a statistically signifi-

cant difference (p < .001) between the proportion of employ-

ees who requested a one-on-one meeting (73%) and the

previous rate reported by the company (25%).

Discussion

The results of this study show support for the effectiveness

of financial psychology retirement meeting interventions

for increasing engagement in employer-sponsored retire-

ment plans. Following the interventions, significant changes

were observed in the hypothesized direction for all vari-

ables under study in the three employer groups. Specifi-

cally, Hypothesis 1 was supported in all three groups, which

showed statistically significant increases in the number

of employees who contribute to their company-sponsored

retirement plan. Hypothesis 2 was also supported across

all three groups, which showed a statistically significant

increase in the overall contribution employees make to their

company sponsored retirement plan. Hypotheses 2a and 2b

were also supported across all three groups, which showed

statistically significant increases in the contribution engaged

employees (AE and PE) made to their company sponsored

retirement plan and in the contributions UE employees

(UE) made to their company sponsored retirement plan.

Hypotheses 3 was supported in Sample 1, which showed a

statistically significant increase in the number of preinter-

vention participating employees who were contributing at

least the minimum required to receive full employer match.

The company in Sample 2 did not offer an employer

match. Sample 3 had no change, as 100% of preintervention

participating employees were contributing at least the min-

imum required to receive full employer match and con-

tinued to do so at post-intervention. Lastly, Hypotheses 4

was supported in all three samples, which showed statisti-

cally significant increases in the number of employees who

requested and attended follow-up one-on-one meetings with

an advisor.

These findings suggest that employees increased their

levels of engagement in the employer sponsored retire-

ment plan following the financial psychology interven-

tion, indicating an overall upward movement on the

HorwitzKlontz Employee Retirement Engagement Hier-

archy. Overall, the number of UE employees was reduced

by 38%, and 68% of the 198 eligible employees held one-

on-one meetings with financial advisors to discuss retire-

ment planning following the intervention meeting. This

is a significant increase from previous rates reported by

the companies. The overall weighted averages of volun-

tary employee contributions for the 198 employees were

increased from 4.03% to 5.61%, representing a 39.2%

increase.

Another measure of the effectiveness of the interven-

tion is in terms of the actual dollar value impact result-

ing from increased employee participation. For the 198

eligible employees within these three employer groups,

the 1-hour financial psychology intervention increased

the total 401(k) retirement savings contributions by

$199,445 in annual contributions and employer matching

funds. These results relate to the current year, and do not

take into account subsequent pay increases, future vol-

untary increases in contribution amounts, return on the

invested assets, and the compounding of these ongoing

contributions over time. Assuming 10 years of contin-

uing contributions and 3% annual compensation raises,

the results of this intervention are projected to gener-

ate over $2,495,000 before investment gains/losses and

compounding.

Strengths, Limitations, and Future Directions

This study has noteworthy limitations. While there was

strong evidence in support of behavioral changes follow-

ing the intervention in a real-world financial planning set-

ting, this study lacked a control group, random selection of

participants, and random assignment to conditions, which

would be consistent with a randomized control trial. Future

research would benefit from the inclusion of a compar-

ison group that participated in a typical retirement plan

meeting. Additionally, the intervention was tested using

medium to small sized employer groups. As such, it would

be difficult to generalize these findings to larger employee

groups. Future testing of larger employer groups would be

beneficial.

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272 Journal of Financial Counseling and Planning, Volume 30, Number 2, 2019

The intervention was delivered by the same presenter across

all three groups using the same delivery method. The

presenter was trained in the financial psychology interven-

tion by the researchers. However, different financial advi-

sors were present for the follow-up meetings with the three

employer groups, none of whom were trained in the finan-

cial psychology intervention. While the results of the three

groups showed significant increases across all measures

tested, it is likely that the results were impacted by the skill

level and motivations of the follow-up financial advisor. It

is possible that had the advisors been aware of the details

of the financial psychology intervention, they could have

helped reinforce the message and further enhance motiva-

tion. Future research would benefit from financial advisors

who were trained in the financial psychology intervention

under study.

The study also has noteworthy strengths. The intervention

was designed for and delivered to an actual employee group

in its natural setting. While generalizability is limited by

the lack of the experimental controls discussed earlier, it

is enhanced by the inclusion of the actual target group for

which the intervention was designed, and not relegated to a

laboratory outside of a work setting with more significant

subject selection limitations. The researchers also examined

the effectiveness of the intervention across three employee

groups, with diverse job descriptions, compensation, demo-

graphics, and plan types. The findings were similar for all

three groups of employees in both white-collar and blue-

collar occupations, different ages, gender splits, and levels

of income. A notable difference between plan types was also

included, with one employer offering a 6% match, another

having no match, and one with a 5% match, offering addi-

tional support for the generalizability of results.

The results of this study revealed several findings of inter-

est for future research. The bank employees represented

a traditional white-collar occupation group and had the

highest average 401(k) account balances, while the other

two groups studied represented traditional blue-collar occu-

pations. The overall employee post participation rate and

average post contribution rate were the highest for the

bank group; however, the bank group had the highest

preintervention average contribution rate. These findings

lead us to question if the occupation, and possibly higher

levels of education and financial literacy, were driving the

greater levels of employee engagement. Since the bank

group was in the financial services industry, one might

expect greater awareness of the need to save, as well as

employees who are more likely to have higher levels of edu-

cation and financial literacy. Therefore, the connection, if

any, between occupation type, education levels, financial lit-

eracy, and employee engagement behaviors is uncertain.

Overall, these results represent an important step in exam-

ining the effectiveness of financial psychology methods and

theory on changing consumer financial behaviors. When

the volume of potential PE and UE employees across all

retirement plans in the United States are considered, this

application of financial psychology could hold tremendous

potential to positively impact the retirement readiness for

millions of Americans. Considering most retirement plans

providers hold annual meetings for employees, the abil-

ity to engage a significant number of PE and UE employ-

ees using financial psychology interventions can occur

relatively quickly. Additionally, financial psychology meth-

ods can be utilized by financial service companies, indi-

vidual financial representatives, and financial planners, to

help address the lack of retirement planning engagement by

their clients across a variety of financial topics and product

solutions.

Financial Planning Implications

The findings of this study suggest several implications for

financial planners. First, many clients and potential clients

can be classified as unengaged in some aspect of their finan-

cial lives. For these individuals, the availability of financial

tools, financial education, robo-advisors, and general finan-

cial advice, do not appear to be sufficient to move them into

action. Engagement for these individuals could be enhanced

if planners integrate financial psychology concepts and tools

into their client engagement efforts. For example, planners

could utilize assessments to better understand the individ-

ual’s money scripts, and craft communication and dialogue

to more effectively connect with them. Also, planners could

use motivational interviewing techniques to assess where

the individual currently resides in the behavioral change

process, and thus adjust their approach to effectively moti-

vate and facilitate change (Klontz, Kahler, & Klontz, 2016).

If the planner recognized UE types of behavior, the appli-

cation of a more qualitative approach versus the traditional

education and information quantitative approach, may be

more effective in motivating the client to engage the plan-

ning process.

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Journal of Financial Counseling and Planning, Volume 30, Number 2, 2019 273

Secondly, the results of this study suggest that for clients

who are already engaged in their retirement planning, finan-

cial psychology efforts may be helpful in deepening their

level of engagement. Specifically, rather than focusing

on educating clients regarding the benefits of saving for

retirement and details on the various investment vehicles

available, planners could benefit from the use of financial

psychology concepts and tools (e.g., Horwitz & Klontz,

2013; Klontz, Britt, & Archuleta, 2015; Klontz, Kahler,

et al., 2016) to help motivate clients toward action.

The results and implications of this research bring to light

a troubling fact about how financial service products and

financial services are marketed to the American population.

Most financial services are designed and targeted specifi-

cally for the AE’s within our population, while the unique

psychological barriers to participating in the PE and UE

groups are largely ignored. This begs the question, is the

root cause of the poor state of retirement readiness in

America driven more by the lack of financial literacy and

education, or by the lack of understanding or ability of the

financial services industry to reach UE and PE individuals?

It is of course easier to speak to the motivated AE employees

who follow the path of the informed and educated investor.

This study offers support for the potential of financial psy-

chology interventions to unlock the retirement readiness

motivation for UE and PE working Americans who are

in desperate need of proper retirement planning, guidance,

and help.

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Disclosure. The authors have no relevant financial interest

or affiliations with any commercial interests related to the

subjects discussed within this article.

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276 Journal of Financial Counseling and Planning, Volume 30, Number 2, 2019