Retirement plan goals are converging around a very narrow alignment. Plan sponsors’ top priorities include improving retirement outcomes, plan participation and engagement, and fiduciary compliance.
So says a recent Principal Retirement Security Survey. The survey aimed to capture plan sponsors’ chief areas of focus, their actions related to retirement savings, consumers’ response to market volatility, and the impacts of the Covid-19 pandemic.
A BenefitsPro article, identifies retirement plan goals of plan sponsors. Reasons to offer a retirement plan include helping to encourage retirement savings and retain employees. Although sponsors believe employees appreciate and value a retirement plan benefit, only a third are confident their employees are saving enough to achieve financial security in their post-career years.
As far as their retirement plan benefit is concerned, plan sponsors are focused on boosting employee engagement and increasing participation rates. Plan sponsors also included making sure the company is fulfilling their fiduciary responsibilities. This can be accomplished by offering a plan that serves participants’ best interests. Specifically, a quarter of sponsors reported focusing more on fees and reasonableness since the pandemic started. Looking to the future, 50% of plan sponsors said they’re optimistic about the next year, while 40% said they’re proceeding with caution.
Principal also surveyed sponsors about the retirement plan features that mattered most to them. High on the list were encouraging retirement readiness and financial wellness. Nearly 90% of sponsors believes an employee’s financial wellness directly correlates to retirement readiness. In addition, 80% said that providing financial wellness resources helps to boost retirement readiness. More than two-thirds agreed they’re responsible for providing financial wellness resources to employees. Plan sponsors also reported interest in automatically enrolling Gen Z employees into financial literacy programs.
Plan sponsors believe they’re successful in encouraging employees to enroll in retirement plans. They also believe employees could use more help when it comes to making decisions about their savings when changing jobs or when they reach retirement. All include a strong emphasis for meeting or exceeding retirement plan goals when planning for retirement income.
Plan sponsors also expressed enthusiasm about automated plan features, such as automatic enrollment. This covers how new-hires are defaulted into the retirement plan with an option to opt out, and auto escalation where deferrals are increased gradually (typically by 1% per year). Nearly 60% of sponsors surveyed said they agreed that automatic features can help to enhance plan effectiveness and improve retirement outcomes. Among sponsors who already offer automatic features, 87% reported an increase in participation, and 80% said employees began saving for retirement earlier.
If your retirement plan design doesn’t make progress toward retirement plan goals – it should! It may be worth talking to your provider to see if adding these features makes sense for your plan and employee population. If your plan already offers auto features, chances are, you’ve seen the benefits firsthand. In that case, it may be worth revisiting your plan design to see what else you can do to enhance its effectiveness and help improve retirement readiness.
Steff C. Chalk is Executive Director of The Retirement Advisor University, a collaboration with UCLA Anderson School of Management Executive Education. Steff also serves as Executive Director of The Plan Sponsor University and is current faculty of The Retirement Adviser University.