This is part two. Click here to see part one.
Leadership – plan decision makers are in a unique position to help improve plan success metrics, from savings rates to investment outcomes. Multiple surveys indicate that employees want and welcome this type of intervention; furthermore, participants who use such help fair better than their counterparts (Financial Engines/AON Hewitt Survey, 2014).
• Fine-tune plan design:
o If the number-one factor in determining how much you’ll have at retirement is the amount you save, closely followed by a well-thought-out asset allocation, we have to pay close attention to two plan features: auto-enrollment and auto-escalation. According to a recent Wells Fargo/Gallup Investor and Retirement Optimism Index study, 75% of participants favor auto-enrollment and 66% want ability to automatically increase contributions on a regular basis.
o Review how employer contributions are allocated, specifically match. Does it motivate employees to save? Will it help anchor a higher deferral percentage? You don’t necessarily have to increase the match budget; for instance, instead of dollar for dollar up to three percent of compensation, you can redesign the match to 50% up to 6% of compensation or even 25% up to 12% of pay.
o These design principles create success in plans of all sizes, large and small. Moreover, they can position the plan sponsor to better address the top-heavy dilemmas, 401(k) deferral and match test failures, provide a boost to employee morale, and address other hidden costs (financial stress and its impact on productivity, delayed retirement’s relation to increase in health care expenses, etc).
o PPA restatement, an IRS requirement to bring all defined contribution plans in line in the Pension Protection Act of 2006 (PPA ’06) creates an opportunity to once again revisit these features and map out a plan for their implementation. Here are some thoughts to start a conversation.
• Reboot plan’s education program:
o According to Voya’s 2013 survey, almost half of pre-retirees want advice on specific key aspects of retirement planning, including developing a retirement income strategy, planning for healthcare expenses and creating a monthly income from savings.
o Map out a participant education program that speaks to the needs of different participant population groups: new plan participants, employees not engaged in the plan, women, and pre-retirees.
o Many record-keepers have pre-designed campaigns (brochures, workshops, paycheck stuffers, and online tools) that are geared to the different needs of participant groups and their communication preferences. Retirement Solutions Consultants can point you in the right direction to access the available resources and design a successful communication/education campaign. Click here for assistance.
As always, retirement solutions consultants are ready to assist as you prepare for meetings with plan sponsor clients and prospects alike. Call us at (888) 926-0600.