Improving DC plan participants’ financial wellness is an increasing priority among plan sponsors. This was a key finding in Aon Hewitt’s “2017 Hot Topics in Retirement and Financial Wellbeing” survey of plan sponsors, covering a wide range of retirement and financial wellness matters. The survey highlighted the continued focus on financial wellness programs – those that go beyond retirement decisions. Approximately 60% of the plan sponsors surveyed reported that they will create or focus on employee financial wellness in 2017. This compares to only 30% three years ago.
A portion of the survey dealt with DC plan issues. Particularly interesting were the responses to the survey question, “What is the most important aspect of participant behavior your organization should address?” The top responses were:
While none of these responses are surprising, it is noteworthy that almost twice as many survey participants cited, “encouraging higher contribution rates,” as those who cited, “increasing participation.” This is likely reflective of the large number of DC plans that have adopted automatic enrollment over recent years. It could also portend similar increases in plans adopting automatic escalation provisions. Currently, auto-escalation provisions are not as prevalent as auto-enrollment provisions, but could grow in popularity as plan sponsors recognize the importance of increasing contribution rates.
Given the interconnectedness of participant behavior, even small initiatives can be beneficial. For example, only 10% of plan sponsors felt that participants had sufficient knowledge about how much needed to be saved to help ensure a successful retirement outcome. A simple initiative that focuses on providing education to address this lack of knowledge could help improve plan participation, contribution rates, and retirement readiness.
It’s refreshing to see “recognizing retirement readiness” ranked highly. Although DC plans have supplanted DB plans as the predominant retirement plan in the U.S., plan providers and participants have been slow to think of and manage DC plans as a true pension plan. This is evident in the focus on the total amount accumulated in the plan rather than the income stream to be provided by the plan. While this appears to be gradually changing, it has a ways to go.
Plan sponsors could benefit by reviewing the survey results and considering initiatives for their plans. The initiatives don’t need to be large and costly; small, incremental steps may be taken to improve plans and participants’ lives. Speak with your plan advisor to discuss your options.
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