Paying off student loans, building emergency savings or even a health savings account are some of the different ways some 401k participants may be able to direct their contributions as employers increasingly look to boost their employees’ retirement security and financial wellbeing, according to findings in a new survey from Willis Towers Watson (WTW).
Overall, the survey found three in four respondents (75%) that sponsor a DC plan made a change to their plan in the last two years and expect to make at least one change over the next two years. An additional 14% of sponsors that didn’t make a change over the last two years plan on making at least one change over the next two years.
Most of the expected enhancements will focus on the employee experience (82%) and financial wellbeing (78%). Additionally, nearly two-thirds (64%) expect to make changes to their plan design.
“Employers are refreshing their DC plans to give employees both the opportunity to save more for retirement and the flexibility to use both their personal and employer contributions in innovative ways to manage their financial needs.”
Alexa Nerdrum, WTW
“Employer interest in helping employees address both their short- and long-term financial concerns has never been greater,” said Alexa Nerdrum, managing director, Retirement, WTW. “To that end, employers are refreshing their DC plans to give employees both the opportunity to save more for retirement and the flexibility to use both their personal and employer contributions in innovative ways to manage their financial needs.”
Indeed, more than one in four respondents (28%) expect to make changes to their plans’ automatic deferral features, while four in 10 sponsors (38%) expect to adopt an innovative contribution strategy. These include allowing participants to use their contributions to reduce student loan debt or directing contributions to an emergency savings fund or a health savings account.
Employers are also continuing to explore ways to integrate DC plan strategy with enhanced financial wellbeing and resilience support, with roughly four in 10 respondents planning or considering this step on top of 42% having already done so. More than nine in 10 (92%) offer or expect to offer access to personalized support, while 91% use or expect to use targeted communications tailored to specific workforce segments. A similar number (91%) offer or expect to offer digital tools to help employees with budgeting and spending.
DC plans as attraction and retention tools
More than half of the survey respondents (55%) expect to have attraction and retention issues over the next two years, with one-third (36%) of those considering their DC plan as an important tool to attract and retain employees.
Significant gaps in priorities are expected over the next two years between sponsors that are connecting their DC plan with attraction and retention and those that are not, with the former group focusing on using their DC plan to enhance employee engagement for retention; raise importance of attracting new talent; and align diversity, equity and inclusion goals.
Interestingly, more than one-third of respondents (35%) that expect attraction and retention issues also expect to differentiate their DC plan from organizations for which they compete for talent. These organizations in particular are looking to enhance certain aspects around the employee experience.
“Employers have a golden opportunity to leverage their DC plan and gain an advantage in attracting and keeping talent,” said Dave Amendola, senior director, Retirement, WTW. “Our research shows that employees prioritize flexibility and choice in their benefit package, view retirement benefits as a key reason to join or stay with a company, and want more help from their employer with planning for a financially secure retirement. Employers that enhance their DC plans with features that target these preferences can better meet their employees’ needs while differentiating themselves as a true employer of choice.”
SEE ALSO:
• Student Loan Repayment Pause to be Extended Again?
• Why Momentum is Building for Emergency Savings Accounts
• Student Debt and Employee Benefits: What Plan Advisors Need to Know
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.
