2022 Non-Profit Plan Focus Areas: Retirement Income and Financial Wellness

New 403b plan study finds organizations also looking to advisors to help enhance employee retirement plan education
Non-Profit Focus Areas, 403b
Image credit: © Dzmitry Skazau | Dreamstime.com

It appears there’s an increased focus for the coming year on retirement income and financial wellness among non-profits with 403b plans.

According to a new Plan Sponsor Council of America (PSCA) survey sponsored by Principal Financial Group, more non-profit organizations with 403b retirement plans are prioritizing retirement income options in 2022, with the number of plan sponsors citing guaranteed income as a top priority more than doubling since last year.

The PSCA conducted a survey of 139 non-profits in October 2021, finding the top priorities for plan sponsors had shifted in a few key areas since surveying done before the pandemic. This included an increase in focus on retirement income solutions in plan design, as well as a 45% jump in prioritizing financial wellness tools—just over 12% of surveyed organizations did so this year, vs. 8.5% in the prior survey.

“Though increasing plan participation and ensuring plan compliance are always top of mind for plan sponsors, we are seeing a shift in other plan priorities as organizations increasingly look to provide tools and support that will increase the long-term financial security of employees,” said Hattie Greenan, director of research and communications at PSCA.

The top 10 403b plan priorities for 2022 as compared to 2020 are:

• Increasing participation rates: 21.7% in 2020; 22.5% in 2022

• Plan compliance/reduce fiduciary liability: 31.4% in 2020; 21.7% in 2022

• Providing retirement income options: 6.2% in 2020; 13.0% in 2022

• Providing financial wellness tools: 8.5% in 2020; 12.3% in 2022

• Increasing deferral rates: 12.4% in 2020; 10.1% in 2022

• Enhancing participant education: N/A in 2020; 8.0% in 2022

• Reducing plan cost: 7.8% in 2020; 5.1% in 2022

• Changing the investment lineup: 6.2% in 2020; 2.2% in 2022

• Conducting an advisor or consultant search: 1.9% in 2020; 1.4% in 2022

• Conducting a Recordkeeper Search: 0.8% in 2020; 1.4% in 2022

“The increased focus on retirement income options and financial literacy is a positive sign toward improving overall financial security for employees in 2022 and beyond.”

Kevin Morris, Principal

Asked to single out the overall primary objective for their 403b plan in 2022, 60% of organizations said they want to maintain their current plans as they are now—a challenge for many in the wake of the disruptions caused by the response to the COVID-19 pandemic, including financial and staffing concerns. Indeed, this was followed by the objective of using the plan to retain employees, reflecting the pressure non-profits are facing amid the current labor shortage.

A powerful tool in that retention strategy looks to be the employer matching contribution. According to the survey, the pandemic has not greatly impacted employer contributions to 403b plans. Most organizations (89.1%) have not made any changes to employer contributions, and only 1.4% of plans indicated that contributions are still suspended with no plans to restore them.

“The resilience of non-profit 403b plan providers in light of what they have been experiencing over the past two years has been impressive,” said Kevin Morris, vice president and chief marketing officer, Retirement and Income Solutions at Principal. “The increased focus on retirement income options and financial literacy is a positive sign toward improving overall financial security for employees in 2022 and beyond.”

Virtual education here to stay

Since last year, nearly a quarter (23.3%) of plan sponsors noted an increase in online education and 18% indicated an increase in webinars. These boosts in virtual options, rather than fading away, seem poised for further innovation and growth. About 46% of plan sponsors say they will engage an advisor to support their employee education efforts in 2022.

The impact of managing employee education differed depending on the size of the organization. Large organizations were much more likely to have adjusted education methods (72.7%) vs. smaller organizations (10.4%).

“The shift in employee education methods to virtual options due to the pandemic appears here to stay,” Morris said. “We are seeing a similar trend at Principal across both 403b and 401k plans and will be working with financial professionals and plan sponsors to ensure the best possible education options for employees.”

View the full report at this link.

SEE ALSO:

• 403b Participation Undeterred by Pandemic

• Fidelity Launches Product to Help Near Retirees Convert 401k, 403b Funds into Guaranteed Income

Brian Anderson Editor
Editor-in-Chief at  | banderson@401kspecialist.com | + posts

Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.

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