One of the ways many organizations are reducing pension risk is by offering a lump-sum cash out opportunity, or window, to former employees. Successful cash outs can reduce participant-driven fees and future plan liabilities, as well as protect plan sponsors from unexpected plan costs. But without a high response rate, cash outs won t deliver the desired results. That's where communication comes in: successfully notifying and educating participants of their cash out options is key to achieving the highest possible response rate.

Generally, Milliman has seen that a program with an effective communication campaign can achieve take-up rates in the range of 50% to 60%. Consider these proven steps to communicate your lump-sum cash out option:

1. Plan for success. Determine how to get your communications into their mailboxes, literally. Do you have good addresses? How about email addresses? If not, how can they be found?

2. Make the message clear. Separate information from action to simplify the decision-making process and to ensure that participants aren't overwhelmed with their options. Highlight what they need to know, what they need to do, and where they can find help along the way. Communication should be carefully presented as unbiased and understandable options.

Our lump-sum communication plan is supported by what the U.S. Government Accountability Office (GAO) reported regarding the eight key types of information participants should have for a sound understanding of a lump-sum offer. Your communication should answer the following questions:

What benefit options are available?
How was the lump sum calculated?
What is the relative value of the lump sum versus the monthly annuity?
What are the potential positive and negative ramifications of accepting the lump sum?
What are the tax implications of accepting a lump sum?
What is the role of the Pension Benefit Guaranty Corporation (PGBC) and what level of protection does the PGBC provide on each benefit option?
What are the instructions for either accepting or rejecting the lump sum?
Who can be contacted for more information or assistance?

An appealing design should complement a clear message. Design, layout, graphics, and colors are all factors that can make the difference between something that gets a response and something that gets ignored.

3. Reinforce the message. Don t expect one mass mailing to do the job. Include multiple touch points to announce the window, educate about the opportunity, and provide reminders about the deadline.

4. Offer support. Be sure to consider where participants can go for help, whether that's a call center, human resources (HR) department, or outside financial advisors. Then provide the service team with materials such as frequently asked questions (FAQs), communication samples, and training to prepare them to answer questions and support the initiative.

5. Go the extra mile. To boost the response rate, you may also want to consider additional touch points, such as:

Webinars with overviews of pension benefits, discussions of lump sums versus annuities, and other considerations
Letters for special situations, such as qualified domestic relations orders (QDROs), alternate payees, etc.
Individual consultations with experienced retirement education specialists
Group meetings to walk through the statement, form, and election process
A website with personalized statements, online election capabilities, and daily reporting of response rates