1|Page | © copyright 2024/2025 | Grade A+
CPSP 2.3 Questions and Answers
(100% Pass)
Section 1: Behavioral Finance
✓ Behavioral finance is a field that seeks to find explanations for, and
solutions to, the seemingly irrational financial decisions that people
often make. For years, despite spending millions annually on employee
education designed to encourage better savings and retirement
outcomes, overall participation rates hovered between two-thirds and
three-quarters of those eligible, and deferral rates clustered around the
employer match. Enter behavioral finance, and its first widely
embraced design, Save More Tomorrow (SMarT), touted by now-Nobel
Prize winner Richard Thaler of the University of Chicago and Schlomo
Benartzi of the University of California at Los Angeles (UCLA). The pair
didn't create the notion of automatic enrollment - under inauspicious
names like "negative election", it had been in place at some employers
since the early 1980s - but they certainly brought the concept to
prominence, culminating in key retirement savings enhancement
provisions in the Pension Protection Act of 2006, including automatic
enrollment, contribution rate acceleration and qualified default
investment alternatives.
Employee Education
Master01 | October, 2024/2025 | Latest update
, 1|Page | © copyright 2024/2025 | Grade A+
✓ In the past, plan sponsors have provided employee education for a
number of different reasons. A study1 by the Plan Sponsor Council of
America (PSCA) reveals that among all plans—small to large—the main
reasons, ranked by importance, that sponsors offer retirement savings
education have been to 1. Increase plan participation; 2. Increase
employee appreciation of the plan; 3. Help employees with retirement
planning; and 1 PSCA, 60th Annual Survey, 2018 3 4. Increase pre-tax
employee salary deferrals
employee education part 11
✓ In order to accomplish these educational goals, employers have used
a variety of materials and media, primarily relying on: 1. Individually
targeted, but generalized, communications using regular and Email; 2.
In-person seminars and workshops; 3. Enrollment kits; 4. Benefits
websites and mobile platforms with savings tools; 5. Personalized
retirement income projections; and 6. Fund performance sheets
Why Education isn't Working
Master01 | October, 2024/2025 | Latest update
, 1|Page | © copyright 2024/2025 | Grade A+
✓ Numerous studies have shown that financial education does not
necessarily produce improved financial behaviors and outcomes.
Moreover, financial stress is at an all-time high for workers. Why doesn't
traditional financial education work? There are, potentially, several
reasons: 1. Good participant intentions often don't translate to actions.
Inertia favors inactivity. 2. The information quickly becomes outdated
with the proliferation of new financial products. 3. A "one-size-fits-all"
approach, generally, does not work. 4. The information does not
effectively address why seemingly rational investors make irrational
systematic errors when making financial decisions. 5. The employees'
cost of other benefits squeezes out 401(k) savings.
Why Education isn't Working
✓ The reality is that human beings struggle with complex financial
decisions - and the traditional approach to retirement plan education
presents them with a series of unknowns, and for many, unknowable,
decisions, including: • How much can I afford to save? • How much do
I need to save? • How much of that savings should be pre-tax? • How
should I invest that savings? • Who should be my beneficiary? • What's
a mutual fund? • How do I fill out this complicated form?
Behavioral Hurdles
Master01 | October, 2024/2025 | Latest update
CPSP 2.3 Questions and Answers
(100% Pass)
Section 1: Behavioral Finance
✓ Behavioral finance is a field that seeks to find explanations for, and
solutions to, the seemingly irrational financial decisions that people
often make. For years, despite spending millions annually on employee
education designed to encourage better savings and retirement
outcomes, overall participation rates hovered between two-thirds and
three-quarters of those eligible, and deferral rates clustered around the
employer match. Enter behavioral finance, and its first widely
embraced design, Save More Tomorrow (SMarT), touted by now-Nobel
Prize winner Richard Thaler of the University of Chicago and Schlomo
Benartzi of the University of California at Los Angeles (UCLA). The pair
didn't create the notion of automatic enrollment - under inauspicious
names like "negative election", it had been in place at some employers
since the early 1980s - but they certainly brought the concept to
prominence, culminating in key retirement savings enhancement
provisions in the Pension Protection Act of 2006, including automatic
enrollment, contribution rate acceleration and qualified default
investment alternatives.
Employee Education
Master01 | October, 2024/2025 | Latest update
, 1|Page | © copyright 2024/2025 | Grade A+
✓ In the past, plan sponsors have provided employee education for a
number of different reasons. A study1 by the Plan Sponsor Council of
America (PSCA) reveals that among all plans—small to large—the main
reasons, ranked by importance, that sponsors offer retirement savings
education have been to 1. Increase plan participation; 2. Increase
employee appreciation of the plan; 3. Help employees with retirement
planning; and 1 PSCA, 60th Annual Survey, 2018 3 4. Increase pre-tax
employee salary deferrals
employee education part 11
✓ In order to accomplish these educational goals, employers have used
a variety of materials and media, primarily relying on: 1. Individually
targeted, but generalized, communications using regular and Email; 2.
In-person seminars and workshops; 3. Enrollment kits; 4. Benefits
websites and mobile platforms with savings tools; 5. Personalized
retirement income projections; and 6. Fund performance sheets
Why Education isn't Working
Master01 | October, 2024/2025 | Latest update
, 1|Page | © copyright 2024/2025 | Grade A+
✓ Numerous studies have shown that financial education does not
necessarily produce improved financial behaviors and outcomes.
Moreover, financial stress is at an all-time high for workers. Why doesn't
traditional financial education work? There are, potentially, several
reasons: 1. Good participant intentions often don't translate to actions.
Inertia favors inactivity. 2. The information quickly becomes outdated
with the proliferation of new financial products. 3. A "one-size-fits-all"
approach, generally, does not work. 4. The information does not
effectively address why seemingly rational investors make irrational
systematic errors when making financial decisions. 5. The employees'
cost of other benefits squeezes out 401(k) savings.
Why Education isn't Working
✓ The reality is that human beings struggle with complex financial
decisions - and the traditional approach to retirement plan education
presents them with a series of unknowns, and for many, unknowable,
decisions, including: • How much can I afford to save? • How much do
I need to save? • How much of that savings should be pre-tax? • How
should I invest that savings? • Who should be my beneficiary? • What's
a mutual fund? • How do I fill out this complicated form?
Behavioral Hurdles
Master01 | October, 2024/2025 | Latest update
