Diversity, equity, and inclusion (DEI) in the workplace has come to the fore in the past few years. Numerous studies have shown that hiring a workforce that includes a variety of skills, backgrounds, and perspectives helps companies achieve greater success. What may not be so apparent is that Diversity, Equity, and Inclusion are also factors to consider in your retirement plan offering.
According to a recent article from Greenspring Advisors that appeared on LinkedIn, “nearly two-thirds of plan sponsors have noticed an increased demand for retirement plans to align with DEI efforts.” As such, now may be a good time for retirement plan sponsors and committees to re-evaluate their 401(k)s through this lens.
Greenspring Advisors invites sponsors to consider your retirement plan’s Diversity, Equity, and Inclusion in light of four key factors:
- Employee demographics: Different cohorts save and invest differently. Evaluate your workforce demographics for those who may be under-saving, not participating, or have an asset allocation that may not be appropriate for their age and stage of life. Once you have this data in hand, you can implement an informed and targeted strategy to help improve savings and participation rates.
- Committee membership: Does your retirement plan committee mirror the diversity of your workforce? Are there ways to bring additional insights to the table that could help enhance your retirement plan’s effectiveness?
- Investment offerings: How could your retirement plan’s investment menu better reflect your workforce demographics? Consult with your plan’s advisor to seek opportunities, if applicable.
- Financial wellness: Beyond the retirement plan, it can be beneficial to help employees hone in on improving their total financial picture. Boosting financial wellness can improve plan outcomes and entice employees to engage more holistically with your benefits offerings.
On that note, addressing DEI is a key component of financial wellness. Employers can help their workforce improve their overall financial situation. This can be accomplished by dialing in their understanding of the key differences that exist in their workforce, including age, race, ethnicity, gender, physical abilities, and sexual orientation. Plan data can be telling when it comes to plan engagement and providing additional resources to those who need it. Fortunately, your retirement plan is no stranger to reporting, so it should be a wellspring of this critical data.
Specifically, auto-enrollment is a plan design feature that can help address savings gaps and racial disparities in participation if they exist. Auto-enrollment is agnostic when it comes to demographics. In addition, Greenspring Advisors observed that when auto enrollment is implemented with Black, Latinx and White Americans, the participation rate remains 80% across the board. And when given the same auto-enrollment default, all employees save the same when they have access.
Generational diversity is another facet to consider. As employees go through life and their careers, their financial needs evolve. Employers should account for these changes to help improve their retirement program’s success. Moreover, as Greenspring Advisors aptly pointed out, “One size doesn’t fit all. Plan sponsors should seek to employ a mix of communications – utilizing brochures, emails, videos, infographics, blog articles, and online calculators – to get the message out to different demographics within the plan.”
Further, Greenspring Advisors offered these best practices:
- get to know your employee demographics;
- assess participant behaviors from different perspectives;
- reach out to your service providers; and
- discuss your options for resources.
This can all be in the form of:
- financial wellness programs;
- multiple language options; and
The intention is to convey the value of your plan to your diverse workforce and help them understand how your plan can help them prepare for retirement. Making plan decisions from a Diversity, Equity, and Inclusion perspective can positively impact your workforce and improve engagement and future financial security for all.