Plan Sponsors Not Optimistic About Markets & Investment Performance

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Plan sponsors are feeling down and out as it relates to the U.S. economy and markets.  This pessimism comes amid a backdrop of floundering stock prices and underperforming portfolios in retirement plans.  Despite a few bright spots, such as a recent decline in gas prices and a slight cooling off of inflation, to be sure, 2022 has been nothing short of a strange year.

According to a recent Retirement Planscape report from business advisory firm Escalent cited in InvestmentNews, defined contribution plan sponsors’ anxiety has ratcheted up big-time.  This pessimism is fueled by additional concerns about employees not saving enough for retirement, fiduciary concerns, and lawsuits.  Plan sponsors have a lot on their minds these days.

InvestmentNews quoted Sonia Davis, senior product director at Escalent, from a statement:  “Creating a retirement plan that is attractive to employees is even more difficult in the current volatile economic and talent environment… In order to combat participant fears, our research supports that plan sponsors need to encourage employees to keep a long game strategy, avoid drastic withdrawals that will hinder future retirement readiness and think beyond saving by seeking help with their decumulation phase.”

“For plan providers, understanding the most pressing issues their customers face and demonstrating capabilities that provide solutions will strengthen client loyalty and pave the path to new business growth,” Davis also said in the statement.

For plan sponsors, it comes down to being diligent in fulfilling your fiduciary duties.  Plan investment options must be diversified enough to fit participants’ needs and goals.  Employee education is also key, as savers need to understand vital concepts such as dollar cost averaging, and that investing for retirement is a long-term strategy.  Many younger employees have never experienced a market downturn, so they may panic and be tempted to pull their retirement savings out of the market.  It’s up to plan sponsors and their financial professional partners to educate participants on the importance of staying the course when it comes to their retirement investments.

According to the Escalent study, nearly 4 in 10 (37%) plan sponsors expect conditions in domestic markets to worsen, up from 20% in 2021. The rise in pessimism stems mostly from the conflict in Ukraine and U.S. market volatility.  Concerns about underperformance in plan investment options continue to increase, with 57% of plan sponsors citing that worry in 2022, up 6% from 2021, Escalent found.

Plan sponsors who are concerned about fulfilling their fiduciary responsibilities during this period of uncertainty don’t have to go it alone.  The Plan Sponsor University (TPSU) offers an in-person and online retirement plan certification program to help business owners, benefits specialists, and other employer fiduciaries to increase their knowledge of retirement plan design, fiduciary obligations, and improving outcomes.  Learn more about TPSU here.


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