For the first time ever, organizations that provide 403b plans reported that retirement planning, rather than increasing participation, is their top focus for employee education, according to the 12th annual 403b Plan Survey from the Plan Sponsor Council of America (PSCA).
More than a third of organizations said their primary purpose for providing plan-related education is retirement planning (34.8%). This is the first time the primary goal has been anything other than to increase participation, though it wasn’t far behind, at 33%. Increasing appreciation for the plan—perhaps reflecting previous emphasis on that aspect in communications—was a distant third at 12.2%.
The most common ways employers educated participants was through e-mail (90.4%), Intranet/Internet sites (48.7%), enrollment kits (40.9%), and providing one-on-one assistance with a financial professional (40.0%).
The survey, sponsored by Principal Financial Group, also found that plan sponsors could use additional support in communicating cybersecurity measures to employees—a growing concern during the COVID-19 pandemic.
“This year’s survey shows encouraging trends in retirement planning education and plan contribution rates in 2019,” said Hattie Greenan, director of research and communications at PSCA. “This is good news, particularly in view of the unique challenges this sector confronted in 2020.”
The fact that more 403b plan sponsors are making retirement planning a priority part of financial education for employees is significant, according to Kevin Morris, vice president and chief marketing officer, retirement and income solutions at Principal.
“It suggests an increased focus on retirement outcomes for employees,” Morris said. “Consultants and financial professionals are likely helping to drive this trend as they work with organizations and plan service providers to share educational resources on saving, budgeting and debt management.”
PSCA, part of the American Retirement Association, conducted the survey in the spring of 2020. The survey received responses from 393 non-profit organizations that currently sponsor a 403b plan for employees and range in size and industry from small community-based organizations to large hospital and university systems.
Cybersecurity education a potential opportunity
Though the survey covered a pre-pandemic/work-from-home period, the results revealed an opportunity into increase education and communication of cybersecurity best practices to employees – this is a trend to watch as we see continued focus in this area.
“With an increasing number of employees working remotely, all aspects of cybersecurity are top of mind for employers, yet only one in three employers initiated cybersecurity communications or awareness to employees,” Morris said. “Working with a financial professional or consultant who can promote the importance of cybersecurity education and features can help protect access to employees’ personal information and financial savings.”
Higher participation and contributions
With the increased emphasis on retirement readiness, and the support of employers, employees of non-profits may be more likely to achieve better retirement outcomes than before.
Plan sponsor contribution rates rose in the last year to an average of 6.3% of pay (up from 5.5% a year ago and 4.7% in 2017). Significantly, in the last two years, employer contributions have increased 34%.
The survey also found an increase in participant contributions, which now average 7.2% of pay. The increase in participant contribution rates is helped in part by higher default deferral rates and automatic escalation of contribution rates. Nearly half (45.1%) of plans now use a default deferral rate higher than the traditional level of 3%, up from 37.7% last year. More than half (51.1%) of plans with automatic enrollment automatically escalate that default deferral percentage over time.
“While it is encouraging to see steady incremental improvements in retirement savings rates, we know that the pandemic has put a lot of pressure on organizations and their employees,” said Greenan. “Hopefully the solid foundation provided by these strong starting points, along with the expanded efforts in retirement planning education, will help employees stay on track to meet their goals.”
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.
