An annual survey of employers seeking information about the changes they intend to make to their retirement and financial wellbeing plans in the year ahead reveals some surprising findings.
The results from Alight’s 17th edition of Hot Topics in Retirement & Financial Wellbeing finds that employers are not currently keen on the new provisions of the Setting Every Community Up for Retirement (SECURE) Act. When asked about certain provisions, few employers so far have incorporated them and not many employers say they are very likely to add them in 2021.
For instance, when asked how interested they are in joining a Pooled Employer Plan (PEP) with other employers, the results show that few employers expressed interest:
- Very interested in a PEP (1%)
- Moderately interested in a PEP (4%)
- Not at all interested in a PEP (95%)
One caveat associated with this finding, however, is that PEPs have been touted as a way to help small businesses provide access to a retirement plan, but only 2% of Alight’s employer respondents consisted of employers with fewer than 1,000 employees. The 2021 version of the report is based on responses from 116 employers with 5.5 million workers, administered in the Fall of 2020.
Employers were a little more open to the idea of having annuities in their DC plan:
- 12% report that they already have annuities in DC plan;
- 3% are very interested in annuities in DC plan;
- 49% are moderately interested; and
- 37% are not at all interested.
While the SECURE Act extended safe harbor protections for plan sponsors when they select annuities, many other obstacles remain before employers will add them to their plans, according to Alight’s findings. Notably, 89% of employer respondents express concern about the operational or administrative procedures of having annuities, and 75% say that they have concerns about the percentage of participants who will use them.
A provision allowing workers to withdraw up to $5,000 for the birth or adoption of a child fared about the same. When asked how interested they would be in adding the provision to their plan, 5% said they already have this provision, 15% said they are very interested, 40% said they are moderately interested and 40% said they are not at all interested.
Financial Wellbeing
Given the impact of the COVID-19 pandemic, financial wellbeing, not surprisingly, remains the top priority for employers. In fact, most employers (56%) say that the importance of financial wellbeing has increased at their organization over the last two years, and none said the focused has decreased.
More than three-quarters (76%) report that they are either very or moderately likely to implement initiatives to address retirement savings gaps within their employee population. Moreover, 9 out of 10 employers also say they are very or moderately likely to create or expand their financial wellbeing programs beyond retirement decisions.
And over the last couple of years, it appears that employers have shifted from developing financial wellbeing strategies to executing on those strategies. Fifty-six percent say they have a financial wellbeing strategy that is either fully executed or in the process of being implemented, which is up from 35% two years ago. And 83% say that they have financial wellbeing as part of a broader initiative that includes other aspects of wellbeing (e.g., physical, emotional, social, etc.)—up from 67% two years ago.
Student loan benefits remain a hot topic among employers and the prevalence of benefits such as student loan consolidation and repayment assistance have been increasing. Alight emphasizes, however, that the likelihood among employers that do not have student loan programs has been waning, suggesting that student loan benefits may remain a “niche offering” that has a foothold in certain industries.
CARES Act, E-Delivery and Other Changes
This year’s report also addresses a few new issues, including the impact of the COVID-19 pandemic on retirement and financial wellbeing plans, and the popularity of electronic disclosures and private equity in DC plans.
While much changed over the past year, many employers remained committed to helping their workers save and plan for retirement. Alight found that almost all employer respondents adopted at least some of the provisions of the CARES Act, but most employers are not adjusting their contributions because of the pandemic:
- 91% of employers say that they made no changes to their match formula in 2020;
- all of the employers who made changes say they suspended their contribution instead of permanently reducing the amount; and
- 99% of employers say that they do not plan on making any changes to their match in 2021.
Electronic delivery was also viewed as a welcome change. According to the findings, 95% of employers say they are “very or moderately” interested in adopting the Department of Labor’s new 2020 safe harbor that makes it easier for plan administrators to provide information to participants by electronic means instead of by paper.
By contrast, more than three-quarters of employer respondents said they are not interested in adding private equity investments, while 18% said they are moderately interested.
