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.
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.