Improved participant outcomes floats to the top of plan sponsors’ top priorities. Goals also include plan participation, engagement, and fiduciary compliance.
So says the second-quarter Principal Retirement Security Survey, which aimed to capture plan sponsors’ chief focal points. Also considered were: actions related to retirement savings, consumers’ response to market volatility, and the impacts of the Covid-19 pandemic.
According to the Principal survey, the results of which were reported in a recent BenefitsPro article, plan sponsors’ chief reasons for offering a retirement plan are to help 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. So, why shouldn’t improved participant outcomes be a high priority?
As far as their retirement plan benefit is concerned, plan sponsors are focused on boosting employee engagement, increasing participation rates, and making sure they’re fulfilling their fiduciary responsibilities. They are accomplishing this by offering a plan that serves participants’ best interests. Specifically, a quarter of plan 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.
Principal also surveyed sponsors about the retirement plan features that mattered most to them, including those that help encourage retirement readiness and financial wellness. Nearly 90% of sponsors said they believed employees’ level of financial literacy 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.
While 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, as well as when planning for retirement income.
According to the survey, sponsors also expressed enthusiasm about automated plan features, such as automatic enrollment, where 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 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 currently include automatic features, it is 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, your participants have benefited 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.