We are finally seeing some encouraging headlines around vaccines and a potential end to the global pandemic coming some time in 2021.
As I look toward the future with optimism, I can’t help but reflect on the last year. We have all adjusted our lives and our businesses to a new normal. We learned about Tiger Kings. We learned how to Zoom. We discovered that social inequality and injustice are still big issues facing America. We put on masks. We stopped going to gyms. We stopped going out to eat. We stopped shaking hands. Even at this very moment, we are abandoning life-long traditions and gatherings as the holidays approach.
In the retirement business specifically, RFPs slowed down. Sales slowed down. Efforts to engage and educate participants slowed down and most, if not all, communications moved to virtual and digital channels.
American workers and savers were confronted with stress on many levels. I have heard this referred to as “stacked stress”—a layering of stress created by multiple things, including remote working, childcare, home schooling, elder care, financial impacts, and the direct effect of COVID-19 and all its uncertainties.
As a result, many Americans have lost focus on long-term planning and instead found themselves fixated on the latest COVID-19 or political news of the moment. Some took advantage of the withdrawal provisions in the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, and made large withdrawals from their retirement plans. Some moved out of equities and into safer investments. Some reduced deferrals into their retirement plans and others stopped contributing to their retirement plans altogether. Very few made long-term financial planning a priority.
Assuming “normal” is near, where does that leave those of us in the financial and retirement industries?
I believe we have an enormous opportunity to create value for the clients we serve and the new clients we are trying to attract.
Start with the SECURE Act
When it comes to engaging plan sponsors, the very positive provisions in the Setting Every Community Up for Retirement Enhancement (SECURE) Act is a great place to start—the passage of which was somewhat lost in the COVID-19 storm.
If you have not yet invested time in understanding the helpful provisions of the SECURE Act, now is a great time to do so. The favorable treatment for in-plan retirement income and the formation of Pooled Employer Plans (PEPs) are two of the provisions that are likely to be of most interest to plan sponsors. Plan sponsors will now have the protection and portability they have been waiting for to extend the power of guaranteed income to workers approaching or transitioning into retirement. PEPs will provide employers, both large and small, with an effective way to enjoy efficiencies that come with combining purchasing power—in addition to the reduction in direct fiduciary risk that is provided under the new law.
SECURE Act’s second chapter creates additional opportunity
A second chapter in the SECURE Act (aka SECURE Act 2.0) is percolating in Washington right now. This new Act contains a handful of additional measures designed to help increase coverage, access and overall savings levels for millions of American workers, through mandatory automatic enrollment and escalation, student loan match provisions, reforms to RMDs, catch-up provisions and more. Becoming familiar with the SECURE Act and the additional provisions in the proposed second installment should supply you with timely, actionable insights to share with your clients and prospects.
Engaging plan participants
When it comes to engaging plan participants, I suspect it will take a lot of extra effort to get them on a long-term savings track post-COVID-19. It was plenty hard before COVID-19, especially given many Americans spend more time planning their next vacation than planning for retirement.
All the needs they had to address prior to COVID-19 are likely still there. For many, these needs have been amplified or new needs have emerged. Things like budgeting, emergency savings, planning for healthcare costs, seeking advice, having a will, repaying COVID-19 withdrawals, portfolio rebalancing, and developing a formal financial plan remain important for millions of American workers.
The other side of normal appears to be right over the horizon. We will be shaking hands again soon! Time to brush up on the SECURE Act and update our participant education content and efforts. Our clients and their workforces will need our help and we have plenty of help to give.
Editor’s Note: The preceding is an op-ed submitted by Jerry Patterson, Senior Vice President, Retirement and Income Solutions at Principal. The views expressed are those of the author and do not necessarily reflect those of 401(k) Specialist.
- More from Jerry Patterson: Helping 401k Participants Navigate the COVID-19 Financial Journey