This year’s underperformance of 401k plan investment options—thanks in large part to a terrible stock market in the first half of 2022—has heightened the anxiety level of defined contribution plan sponsors, according to a recent Cogent Syndicated report from Livonia, Mich.-based advisory firm Escalent.
Top concerns include employees not saving enough for retirement, fiduciary issues and potential lawsuits. But the report concludes that these looming challenges create an opportunity for plan providers to offer support, stepping in to help with guidance on compliance, shifting regulations and employee engagement.
“In order to combat participant fears, our research supports that plan sponsors need to encourage employees to keep a long game strategy, avoid drastic withdrawals that will hinder future retirement readiness and think beyond saving by seeking help with their decumulation phase.”
Sonia Davis, Escalent
These are highlights among the latest findings of the Retirement Planscape Report, which uncovers critical trends in the plan sponsor market and pinpoints strengths and weaknesses in brand, loyalty and key plan sponsor experience metrics.
“Creating a retirement plan that is attractive to employees is even more difficult in the current volatile economic and talent environment,” said Sonia Davis, senior product director at Escalent. “In order to combat participant fears, our research supports that plan sponsors need to encourage employees to keep a long game strategy, avoid drastic withdrawals that will hinder future retirement readiness and think beyond saving by seeking help with their decumulation phase.”
Becoming increasingly pessimistic about the U.S. economy due to the Ukraine war and market volatility, nearly four in 10 (37%) plan sponsors expect domestic marketplace conditions to worsen, up significantly from 20% in 2021. Concern about underperformance of plan investment options continues to grow with 57% of plan sponsors concerned in 2022, increasing by 6% since 2021.
“For plan providers, understanding the most pressing issues their customers face and demonstrating capabilities that provide solutions will strengthen client loyalty and pave the path to new business growth,” added Davis.
Cogent Syndicated, a division of Escalent, conducted the online survey of a representative cross section of 1,267 401k plan sponsors earlier this year to form the report.
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