Employers overwhelmingly are most focused on expanding their financial wellbeing benefits and are taking a more holistic approach “to help workers create a healthy wallet, body, mind and life,” according to an annual study by Alight Solutions.
Now in its 16th year, the firm’s “2020 Hot Topics in Retirement and Financial Wellbeing” report reveals that nearly all employers (92%) say they are likely to expand their financial wellbeing programs in ways that extend beyond their retirement plans, with two-thirds indicating they are very likely to take action in 2020.
The study is based on an annual survey that Alight administers to employers to capture the changes they intend to make to their retirement and financial wellbeing plans in the year ahead. The 2020 version was administered in the fall of 2019 and contains responses from over 130 organizations that employ 5.5 million workers.
While lifetime income is important to many employers, Alight reports that it is not necessarily a top priority, as most employers believe, instead, that addressing broad financial wellbeing and encouraging higher contribution rates are the most important behaviors to address.
As such, employers are increasingly likely to incorporate reminders about savings programs during annual enrollment. According to the study, nearly half of all employers say they are planning to fold education about their DC plans into annual enrollment communications, and most employers are likely to take some action to help curb loans from the plan. Additionally, one-third of employers are sharing information about the link between financial stress and overall health and wellbeing.
Improving Plan Statistics
While participation remains the topic with the highest degree of satisfaction among plan sponsors, Alight notes that fewer than half (47%) of the employer respondents are content with their participation rate. In addition, among companies that are not satisfied with this, two-thirds indicated they are “very likely to address” this issue.
To that end, when asked which aspect of employee behavior within their DC plans they think is the most important to address, employer responses included:
- focusing on why individuals do not participate or save more in the plan (26%);
- encouraging higher contribution rates (23%);
- having plans in place to help participants reach their retirement savings goals (16%);
- minimizing plan leakage that occurs through loans and withdrawals (13%); and
- increasing participation by having more eligible employees actively saving in the plan (13%).
Bridging the Gap from Work to Retirement
Two-thirds of employers think they will experience an increase in retirement-eligible workers over the next three years and many are taking steps to help these individuals not only prepare for the transition to retirement, but to remain connected to the employer after leaving the company, the study further notes. Nearly half of employers indicate that they are going to “ramp up” their retirement planning education to near-retirees and increase communication about the retirement process.
Moreover, Alight notes that an increasing percentage of employers prefer that terminated workers keep their balances in the DC plan. According to the findings, 40% of employers want former employees to remain in the plan, an increase of seven percentage points from 2019, while only 7% prefer that these individuals leave the plan.
Alight further observes that there is increased scrutiny being paid to IRA rollovers, perhaps because of this desire for wanting employees to remain in the plan. The study notes that from 2019 to 2020, the percentage of employers that do some sort of benchmarking on the money leaving their plans and going to IRAs increased from 26% to 37%.
Additionally, a majority of employers say they are interested in an automatic rollover program that can help people who are subject to mandatory distributions (<$5,000) consolidate retirement savings into their current employer’s plan.
Missing Participants
Employers apparently are also searching for missing participants more frequently than in the past. Alight reports that 15% of DC plans now search on a monthly basis (up from 6% in 2019) and 16% of DB plans search on a monthly basis (up from 7% in 2019). Employers are also using multiple tools in their arsenal to try to find missing participants, from searching addresses to conducting outreach via first class mail, certified letters, phone calls and email.
