In their feature article in the latest issue of NAPA Net the Magazine, Alice Palmer, Fred Reish, Bruce Ashton and Brad Campbell outline ways to meet the challenges inherent in implementing gamification.
401(k) plans have enabled tens of millions of American workers to accumulate meaningful retirement savings. However, the country’s retirement savings system still has challenges. Two of the biggest are how to get more people to participate in plans, and how to help them to save more than they do. The growing popularity of automatically enrolled plans has put many on the right track. That said, we also see an opportunity to help even more people participate and save at more optimal rates—and at the same time to make it “fun”—through the use of elements of game playing or what’s been termed “gamification” (pronounced “game-a-fication”).
What is Gamification?
Gamification refers to the use of elements of game playing, such as point scoring, competition with others, rules of play and ultimately a prize or benefit, to encourage or increase engagement. In the plan context, we propose using gamification as a technique for improving outcomes—specifically, for encouraging participation and saving in deferral-based retirement plans (e.g., 401(k) or 403(b) plans).
Gamification is effective because it puts a decision normally associated with sacrifice or effort into a fun context that provides an immediate reward, such as a contest that provides a chance to win something of value (a tangible gift or recognition) if people participate in specified behaviors. For example, a company might sponsor a contest to get employees to adopt more healthy lifestyles by offering a gift card to those who record the highest number of steps over a two-week period. This “game” provides a short-term challenge, peer recognition (i.e., the “winners” are announced to the entire workforce) and a modest reward for those who participate.
In the context of participant-deferral plans, this may seem like a good idea—turn the sometimes complex decision to participate or defer into a game. Before employers use this approach, there are some legal considerations that need to be addressed. These include:
- the contingent benefit rule (applicable to 401(k) but not 403(b) or 457 plans)
- nondiscrimination concerns (applicable to both 401(k) and 403(b) plans, but not 457 plans); and
- fiduciary issues (applicable to nongovernmental 401(k) and ERISA 403(b) plans, but not non-ERISA 403(b) or 457 plans).
None of these are insurmountable, plus Congress is considering bipartisan pension reform legislation (the so-called SECURE Act 2.0 and the Portman-Cardin bill in the Senate) that would remove the first of these barriers to gamification. For a variety of reasons, we urge Congress to pass that legislation in the very near future. But even if we don’t these reforms, gamification can be used under current law.
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