Employers are eyeing changes to their DC plans in an effort to improve their employees’ retirement security and financial wellbeing and to help with recruitment and retention.
In a survey of 363 DC plan sponsors representing a broad range of industries, Willis Towers Watson found that 75% of respondents made a change to their plan in the last two years and expect to make at least one change over the next two years. An additional 14% of sponsors that did not make a change over the last two years plan on making at least one change over the next two years.
Among the various enhancements being weighed, most focus on the employee experience (82%) and financial wellbeing (78%). In addition, 64% expect to make changes to their plan design. In fact, 28% expect to make changes to their plans’ automatic deferral features, with the top potential changes here including auto-escalation (22%), auto-enrollment (18%) and employer match value (17%).
Similarly, 38% expect to adopt an innovative contribution strategy. These include allowing participants to use their contributions to reduce student loan debt or directing contributions to an emergency savings fund or a health savings account.
Employers are also continuing to explore ways to integrate DC plan strategy with enhanced financial wellbeing and resilience support, with roughly 4 in 10 respondents planning or considering this step on top of 42% having already done so.
More than 9 in 10 (92%) offer or expect to offer access to personalized support, while 91% use or expect to use targeted communications tailored to specific workforce segments. A similar number (91%) offer or expect to offer digital tools to help employees with budgeting and spending.
“Employer interest in helping employees address both their short- and long-term financial concerns has never been greater,” said Alexa Nerdrum, managing director, Retirement, WTW. “To that end, employers are refreshing their DC plans to give employees both the opportunity to save more for retirement and the flexibility to use both their personal and employer contributions in innovative ways to manage their financial needs.”
Attraction and Retention
These prospective enhancements come as more than half of the survey respondents (55%) expect to have attraction and retention issues over the next two years, with more than a third (36%) of those considering their DC plan as a valuable tool to attract and retain employees.
In addition, significant gaps in priorities are expected over the next two years between sponsors that are connecting their DC plan with attraction and retention, and those that are not, with the former group focusing on using their DC plan to:
- enhance employee engagement for retention;
- raise importance of attracting new talent; and
- align diversity, equity and inclusion goals.
To that point, WTW’s survey found that more than a third of respondents (35%) that anticipate attraction and retention issues also expect to differentiate their DC plan from organizations for which they compete for talent. These organizations, in particular, are looking to enhance certain aspects around the employee experience.
“Our research shows that employees prioritize flexibility and choice in their benefit package, view retirement benefits as a key reason to join or stay with a company, and want more help from their employer with planning for a financially secure retirement,” notes Dave Amendola, senior director, Retirement, WTW. “Employers that enhance their DC plans with features that target these preferences can better meet their employees’ needs while differentiating themselves as a true employer of choice.”
WTW’s survey was conducted during January and February 2022.
