May 2014

Inside this issue:

Power of Peer Influence: From Inertia to Action

The defined contribution industry is finding that peer influence can be highly effective at fighting procrastination—and encouraging long-term savings habits.

The digital world is accentuating the power of peer influence. Social recommendations, customer advocacy, and word-of-mouth marketing are among today’s most powerful marketing tools.


  • “Friends” influence buying – Nearly 68% of Facebook users say a Facebook friend’s recommendation would make them more likely to buy a product or visit a retailer.¹
  • Gen Y / Millennials lead brand advocacy trend – Research finds that a third of those age 18 to 34 are making proactive recommendations.²
  • Look at your own experience – How often do you read the peer reviews before buying online? How often do you select a restaurant based on a friend’s recommendation? Consider the popularity of Consumer Reports or Angie’s List.

DC Implications: Peer marketing techniques are efficient
and cost-effective

While individual guidance and advice remain critical, DC plan providers and sponsors may be able to enhance participant outcomes by deploying successful peer marketing techniques.

Consider how peer marketing techniques can be leveraged to create more successful DC plans. Short-term tactics:

  1. Create a network of plan “brand advocates”— it starts at the top
    Success ultimately depends on a sponsor’s top-down support and advocacy efforts. Start by crafting effective, shared messaging. Then, engage them in identifying the influencers in their organizations who can serve as powerful word-of-mouth advocates.
  2. Establish forums for sharing successful strategies and encouraging accountability
    Include a participant testimonial portion within seminars and webinars conducted by plan providers. Hearing the ease with which their peers have successfully saved can be a game changer for attendees. Supplement these sessions with employee-driven, sponsor-supported forums where participants can share successful saving strategies.
  3. Provide peer benchmarks
    Consider showing plan participants how others within a similar demographic are doing in terms of saving and investing for retirement. Take care, however, to emphasize the importance of continual improvement over time.

Morpace Omnibus Report, Morpace, April 2010.
PostRelease survey conducted by Synovate, January 2010.

This article was originally published by T.Rowe Price: Power of Peer Influence: From Inertia to Action. May 2013. It has been abridged for this newsletter

Pass or Fail? Corrective Actions to Remedy Your Test Results

Each year you receive a “pass” or “fail” from your service provider regarding required non-discrimination testing (the Actual Deferral Percentage test and/or the Actual Contribution Percentage test). The ADP/ACP tests govern the amounts of deferrals and/or matching contributions that highly compensated employees (HCEs) are allowed to make or receive in relation to those of non-highly compensated employees (NHCEs).

If you received a “fail” do not panic. As long as an IRS-prescribed corrective action is undertaken, the plan’s health is not in jeopardy. Correction can be made by either:

  1. Refunds of excess contributions (plus earnings thereon) to HCEs
  2. By employer qualified non-elective contributions (QNECs) or qualified matching contributions (QMACs) to NHCEs under the plan, or
  3. By recharacterizing excess contributions. The most common corrective method is the refund of excess contributions to HCEs following IRS procedures.

Refunds must be distributed within two and a half months (or six months in the event the plan has an EACA design) following the end of the plan’s test year (March 15 for calendar year plans) in order to avoid an excise tax.

There are a number of strategies that can be used to proactively address these issues for future plan years. For assistance, contact MRPA at

Balance Is Better!

- David M. Montgomery, AIF®, CRPS

Balance is a word we hear tossed around a lot these days. We want work/life balance. We try to eat balanced meals. And we try to balance our to-do list against our need for rest and relaxation. Since most agree that balance is important, why do we often find it so difficult to apply balance to matters of finance?

According to behavioral scientists, it’s because we’re human. Rationality isn’t always top of mind when we make money decisions. Instead, we may rely on emotions -- the excitement of an investment’s recent experience, the desire to feel secure, or the recommendation of someone we trust, even if he or she isn’t an investment expert. Unfortunately, this method of making investment decisions often does not lead to success.

The balance of investments you choose should consider two basic things and how they work together. The first is your personal tolerance for risk, and the second is the amount of time you have available before you need the money. By diversifying your investments, you may benefit from positive returns on one type of investment while being insulated from some of the negative returns of another. Your overall investment portfolio may experience less volatility than it would if you invested in only one category, contributing to your financial health.

So review your investments with an eye toward balance by including a variety of investments in your overall portfolio. Many financial institutions have a risk tolerance questionnaire on their websites or in your retirement plan enrollment book to help you plan your exact investment mix. When you achieve balance in this important area of your life, you may find that the result is well worth your effort.

For additional guidance on this subject, contact David Montgomery at

Seeds of Investing

For a copy of this month’s Seeds of Investing newsletter, formatted for distribution to retirement plan participants, contact David Montgomery at or 813-868-1930.

News from MRPA

  • Welcome to Ronald Letaw! Based in the Atlanta area, Ron will provide retirement plan consulting services to MRPA clients and serve as business manager for the firm. He comes to MRPA from nine years in a senior client relations position with a leading recordkeeper.
  • Mike Montgomery spoke on a retirement plan advisor panel on trends in retirement plan consulting at the Independent Financial Partners Annual Conference on March 26th, 2014.
  • Mike Montgomery participated in a panel discussion on the evolving role of retirement plan advisors at the LIMRA Retirement Industry Conference in Chicago on April 11, 2014.

No strategy assures a profit or protect against loss.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

This information was developed as a general guide to educate plan sponsors, but is not intended as authoritative guidance or tax or legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation. In no way does advisor assure that, by using the information provided, plan sponsor will be in compliance with ERISA regulations. 

Montgomery Retirement Plan Advisors does not warrant and is not responsible for errors or omissions in the content of this newsletter.

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