Data & Research January 29, 2019

Overall Financial Wellness is Sponsors’ Top Priority for 2019

Defined contribution (DC) plan sponsors’ No. 1 goal for their participants has moved from increasing savings rates to addressing workers’ broad financial wellbeing and helping them achieve retirement readiness, Alight Solutions found.

Reported by

In the past five years, defined contribution (DC) plan sponsors likely to add or expand financial wellbeing programs has expanded from 30% to 65%, according to Alight’s “2019 Top Topics in Retirement and Financial Wellbeing: Building on the Past, Working Toward the Future.”

Sponsors’ No. 1 goal for their participants has moved from increasing savings rates to addressing workers’ broad financial wellbeing and helping them achieve retirement readiness.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

Specifically, 64% of employers say their financial wellness program is more important at their organization than it was two years ago. They see four stages of financial wellbeing: 1) understanding income and expenses, and managing debt; 2) establishing savings goals and understanding investments and insurance; 3) understanding investment vehicles and maximizing asset growth; and 4) estate planning and understanding Social Security.

The most common topics their financial wellbeing programs cover are: the basics of financial markets and simple investing (cited by 50%), budgeting (44%), health care education and planning (39%), financial planning (38%), debt management (32%), emergency and retirement savings (21%) and assistance with other financial goals, such as home purchases and college savings (25%).

Asked what areas of financial wellbeing they feel responsible to help their employees with, the employers say saving for retirement/long-term needs (83%), obtaining disability insurance (72%), obtaining life insurance (70%), obtaining identity protection services (27%), establishing an emergency fund (22%), creating or managing a budget (20%), saving for children’s education (20%), saving for short-term needs (19%), help with debt management (19%) and paying off student loans or refinancing (16%).

Asked about their reasons for offering a financial wellness program, employers say it is to enhance the overall employee experience (84%), because it is the right thing to do (82%), to increase employee engagement (72%), to differentiate the workplace (53%), to decrease employee time spent addressing financial issues (49%), to improve retirement statistics (49%), because employees are asking for such a program (43%), and, finally, to decrease medical costs (28%).

Asked how they measure the effectiveness of their financial wellbeing programs, 76% say employee usage, 58% say employee engagement, 51% look at retirement statistics, 21% consider medical costs and 9% look at absenteeism.

Asked what aspects of employee behavior in defined contribution (DC) plans are important to address, employers say addressing broad financial wellbeing (32%), retirement readiness (27%), encouraging higher contributions (16%), minimizing leakage (11%) and increasing participation (7%).

More findings from Alight Solutions’ study are here.
Data & Research January 28, 2019

DC Plan Sponsors Seek to Keep Assets in Their Plans

Notably, more than 60% of employers want to keep retirees in their plan, and they are looking to change their targeted communications to inspire action, Alight Solutions found.

Reported by

Alight’s “2019 Top Topics in Retirement and Financial Wellbeing: Building on the Past, Working Toward the Future,” looks at how retirement plans have changed since it first conducted its survey of employers 10 years ago, as well as retirement plan sponsors’ top goals for their plans in 2019.

The top three goals for 2019 include expanding financial wellbeing programs, keeping retirees’ assets in the plan and locating missing participants. Sixty-one percent say the threat of lawsuits prevents them from being more innovative with their defined contribution (DC) plan.

Notably, more than 60% of employers want to keep retirees in their plan, and they are looking to change their targeted communications to inspire action. Thirty-three percent of employers prefer that terminated employees keep their balances in the plan. Since 2017, 18% of employers have implemented a voluntary early retirement/separation program.

To address an increase in retirement-eligible participants, 26% of employers plan to provide retirement planning education to near-retirees. Twenty-four percent plan to increase the level of automation, self-service and/or web access. Sixteen percent plan to provide help with Social Security, 12% plan to increase communication about the retirement process, and 10% plan to provide help with Medicaid planning.

Asked what retirement income tools they provide, 76% of employers offer online modeling tools, 57% provide information on plan distribution options, 47% offer managed accounts, 18% have managed payout funds, and 11% have an annuity or other type of insurance product in the plan.

Among those that do not offer any type of in-plan income options, 53% say a major reason is fiduciary concerns, followed by waiting to see how the market evolves (45%), operational or administrative concerns (40%) and participant utilization concerns (27%).

In addition, in 2019, 11% of sponsors plan to send targeted communications about the impact of loans on retirement, up from 8% in 2018. Concerned about plan leakage, 55% say they are considering allowing terminated employees to continue to repay loans. Twenty-nine percent are weighing implementing a waiting period between loans, 18% might study demographic data on those taking loans, and 16% might reduce the number of loans available.

While employers have embraced automatic enrollment, 40% believe target-date funds (TDFs) as the qualified default investment alternative (QDIA) should incorporate additional factors besides age. They are also starting to offer additional benefits, such as health savings accounts (HSAs).

Eighty-five percent of employers offer a health savings account (HSA), and of this group, 82% make contributions to the HSA. Seventy-five percent position their HSAs as good tools to help manage both short-term medical expenses and long-term savings.

Eighty-five percent of DC sponsors are look for missing participants. Alight notes that “with an increasingly mobile workforce, there are many people who are due retirement benefits from previous employers but have lost contact with those employers.”

To find missing employees, employers are conducting address searches, conducting outreach via first-class mail, sending certified letters, calling workers and emailing workers.

Alight’s full report can be downloaded here.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

«