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Targeted Communication Helps Engage Participants

Renee M. Rettler photo

By Renee M. Rettler, Assistant Director-Consulting at the Principal Financial Group®

This article originally ran in the April 2013 ESOP Report newsletter, the newsletter of The ESOP Association. Reposted with permission from The ESOP Association.

Developing a 12-month communication plan is a great way to ensure that you are providing frequent messages about your ESOP to participants. The communication plan is a roadmap that will help you focus your efforts throughout the year.

A typical communication plan may list the following for each month:

  • What is happening in the plan (i.e. new participants are entering the ESOP, the stock value is being determined),
  • What you are doing (i.e. announcing the new stock value, planning Employee Ownership Month activities),
  • What ESOP message will be posted to the company intranet,
  • What ESOP meetings are taking place, and
  • What training and development opportunities are available (conferences and webinars).

Most likely you would not have each of these items listed in every month, but laying out a communication plan in this manner will help you identify where your current communication efforts may be lacking.

As you review your communication plan for the year, you should keep in mind that not all participants will be interested in every activity you have planned. This may become obvious as some participants nod off during an ESOP presentation while others may be on the edge of their seats hanging on your every word!

This is where targeted communication can be helpful. One way to target communication is according to tenure at the company.

Newer Participants (0 — 5 Years)

Participants who are new to the ESOP need a lot of education. Communication should begin with the basics — what an ESOP is and how it works. ESOP education should start shortly after the employee's date of hire. Even if new employees have to wait a year to become eligible for the ESOP, it can be a good retention tool if the employees understand the benefits they will receive once eligible.

Training should include information about the plan provisions — when employees become eligible for the plan, how they receive contributions, how much the contributions may be and where they come from, what vesting is, how the stock value is determined, and how participants can impact the stock value.

Building this base of knowledge is very important and new participants will be interested in this information. However, many of your more tenured participants will not want to sit through a full explanation of how the ESOP works year after year. Therefore, these types of presentations should be targeted to the newer participants (tenured participants are welcome to attend but are not required).

Tenured Participants (6 or More Years)

Once the participants have been in the plan for a few years, they should have a good understanding of how the ESOP works. For this group, you may want to focus on more advanced topics. Perhaps dig deeper into the stock valuation process and share concrete examples of actions participants have taken that have influenced the stock value positively (recognize those individuals!) and actions that could impact the value negatively.

You could hold a vesting ceremony when participants reach 100% vesting in their ESOP balance (in most cases this happens after no more than six years) and offer some type of award for the achievement. Merchandise with the company logo and an indication that the company is employee owned are very popular.

As participants who are at least in their 50s approach their 8th or 9th year of participation in the ESOP, education about diversification should take place. The participants need to understand they will have the option to diversify a portion of their stock account balance in the ESOP and what they can do with the diversified amounts. Of course, the calculation of the amount eligible to diversify can be confusing, so a handout walking through an example would be helpful.

Participants Nearing Retirement

As participants approach retirement age, they should receive education about when and how their ESOP balance will be distributed to them upon retirement, as well as the potential tax implications of their decisions. Their ESOP balance can be an important part of their total retirement planning. If they assume they will receive a lump sum distribution and the distribution policy calls for annual installments, that may cause a large discrepancy in their retirement planning.

All Participants

All ESOP participants, regardless of age or tenure with the company, should receive communications regarding company performance, changes to the ESOP, and current stock value.

When distributing ESOP statements to participants, go one step further and include additional information.

Explain the benefit level provided by the ESOP and compare it to national averages, provide a history of the company stock value, and/or provide statistics about the average account balance in the ESOP or the total benefits that have been paid to retirees.

A total benefit statement that shows the total benefits provided by the company can be an effective employee retention tool. Include benefits provided by the ESOP, what participants receive in the 401(k) plan, health insurance, vacation pay, etc.

Developing a communication plan to promote understanding and appreciation of your ESOP can help maximize the motivational benefits of employee ownership. Targeting communication to those who need it the most will help ensure that your efforts have the most impact.

Insurance products and plan administrative services are provided by Principal Life Insurance Company a member of the Principal Financial Group® (The Principal®), Des Moines, IA 50392.

HZ1463 06/2013

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