COVID-19 Creating Huge Challenges for Higher-Ed Retirement Plans

Higher Ed, Higher Education Retirement Plans

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As a result of the pandemic, 41% of higher education institutions have already reduced or stopped their employer matching contribution, and 87% of them believe COVID-19 will have a significant impact on their employees’ retirement readiness.

Those are among the key findings of an inaugural survey of retirement plans in public and private higher education conducted by Greenwald Research on behalf of Voya Financial. Approximately 300 key retirement plan decision-makers were surveyed regarding key issues impacting the structure and management of their defined contribution retirement plans.

Brodie Wood

“The impact of the COVID-19 pandemic on higher education has been significant and will reshape almost every aspect of how these institutions are managed,” said Brodie Wood, SVP and national practice leader for Education Markets, Voya Financial. “As a result, there is an opportunity for providers—now more than ever—to help higher education plan sponsors better understand how to assist their faculty, administrators and staff to help them get ready to retire better.”

The research also found over half of those surveyed (53%) want providers to offer more help getting employees ready for retirement. Expanding financial wellness offerings was identified as a top priority.

A nearly three-quarters majority (74%) of institutions in higher education offer financial wellness programs with robust features that focus on planning for retirement, investing and budgeting. Still, over half (51%) are looking for support and want help from providers with improving the overall financial wellness of their employees.

“The growing importance of financial wellness initiatives in higher education is a key takeaway from the survey—especially as many sponsors plan to expand their offerings to participants in the next 12 months,” Wood said.

In the next year, many plan sponsors indicated they intend to expand their financial wellness programs to include, for example:

Voya has now released a white paper—Lessons learned on the management of higher education retirement plans in challenging times. The report delivers insights about the current challenges that higher education institutions face, including the impact of the COVID-19 pandemic, in motivating employees to save for retirement and constructing an overall financial wellness program that guides employees to and through retirement. Other key findings include:

“Key plan design best practices such as automatic enrollment, automatic deferral escalation, ‘stretching the match’ and annual re-enrollment can help drive better participant outcomes,” Wood added.

“The survey also reveals that higher education institutions are focused on providing their employees with guidance to help make informed investment and retirement decisions. Many recognize the value of managed accounts, as 55% currently offer them and 35% plan to add them,” Wood continued. “Also, higher education sponsors are increasingly interested in providing environmental, social and governance (ESG) fund options in retirement plans.”

Interestingly, Wood said half (50%) indicated it was “very important” to—over the next two years—provide investment options to participants that focus on companies that have a positive social or governance impact.

“And finally, with the shift to virtual work and learning during the COVID-19 pandemic, the survey reinforces the value of delivering education to participants how, when and where they need,” Wood said. “At Voya, I am proud to report that we conducted over 20,000 virtual education meetings via Zoom last year, and we are on pace to conduct another 30,000 in 2021.”

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