A recent study by Lincoln Financial Group revealed key changes plan sponsors working in the government sector are hoping to see from their service providers.
The study, which surveyed 4,100 plan sponsors, reports employers are pressing for better technology, advanced plan designs and personalized service from providers, in order to raise participation among workers.
Government plan sponsors want more focus on communication and increased participation rates, because ultimately they want to help their employees save for retirement,” says Gregg Holgate, head of institutional services at Lincoln Financial Group. “For providers, consultants and advisers, these are actionable insights that will help better serve the government market.”
While most government employers (53%) offer defined contribution (DC) plans to their employees, only slightly more than half (56%) of those plan sponsors believe they are successful in aiding a worker’s retirement savings. Furthermore, the study discovered participation rates in DC plans offered by a government employer are much lower compared to 401(k) plans, with only a 44% participation rate found in government plans compared to 82% in 401(k).
More specifically, across the board, participation and deferral rates fared far lower than in 401(k) and 403(b) plans. A participation rate of 38% and a deferral rate of 2% was found on the counties level; special tax authorities saw a 43% participation rate and a 3% deferral rate; and the federal/state level had a 42% participation rate and a 3% deferral rate; among others.
And although 93% of sponsors are dissatisfied with these low rates of participation among employees, according to the survey, another 93% of employers are unhappy with the service and communication received from plan providers. Fifty-percent of sponsors believe employee communication is the answer to meet retirement goals, according to the study, yet only 10% of consultants and 20% of providers emphasize communication. Seventy-five percent of consultants, along with 65% of providers were found to pay more attention to investments and administration. Only 14% of sponsors indicated investments and administration as a need to reach their goals in the survey.
Across the board, over 90% of all government levels consider one-on-one guidance and employee communication as most effective. These rates include 94% of employers on the counties level; 92% of federal/state plan sponsors; 95% of higher-education/public hospitals; 92% of cities; and more.
More information on the study can be found here.