K-12 Public School Employees Need Retirement and Financial Planning Help

Personalized, holistic financial education through various mediums can make up for the one-on-one provider meetings they were used to before the pandemic hit.

K-12 employees are significantly more likely than other government employees to be very or extremely concerned about being able to retire when they want (44% and 36%, respectively), according to a national survey of 1,203 state and local government employees, including 493 K-12 public school employees, conducted by MissionSquare Research Institute (formerly the Center for State and Local Government Excellence at ICMA-RC) and Greenwald Research.

Jim Kiley, head of sales for the Eastern U.S. at Security Benefit, explains that generally, K-12 employees work one-on-one with provider representatives to adjust their retirement savings to their needs. He says research shows that a trusted adviser working with an employee leads to better results, but working with an adviser on decisions for savings to reach retirement goals and proper investment allocation has been altered because of the pandemic.

Lynne Smith, chief client experience and technology officer at MissionSquare Retirement (formerly ICMA-RC), says the use of multiple 403(b) plan providers is very common among K-12 public school systems. Prior to the onset of the COVID-19 pandemic, specialists would be on campus for one-on-one discussions or to answer questions, but when schools went virtual that was not available. Smith says that with teachers holding virtual classes all day, it was a challenge to get them to be virtual with advisers.

School systems also had a challenge with knowing how to electronically get to support staff. For example, bus drivers might not have access to what they need for virtual education and meetings. Sponsors also have to consider at what times employees are available.

Kiley says the COVID-19 pandemic really proved to Security Benefit how important financial advisers are. The firm went into action, working with the National Education Association (NEA), to determine how to best help educators. For example, Security Benefit hosted a webinar last April on the Coronavirus Aid, Relief and Economic Security (CARES) Act for all teachers’ association presidents, who also work with K-12 support staff. Then, at their request, the company held similar webinars for their membership.

“The CARES Act was very important,” Kiley says. “Whether its stimulus checks, extension of time to pay student loans or being able to withdraw from retirement accounts, people needed to know what it included.”

But in addition to getting information, individuals need someone to help them understand how it fits into their financial and retirement planning and what they need to do, Kiley adds. For this reason, advisers switched to virtual meetings and webinars, as well as phone calls, to replace the face-to-face meetings.

Kiley also says advisers are important because school systems typically do not have a robust human resources (HR) department. During the pandemic, they were focused on safety and moving to virtual education. “The 403(b) plan was probably not at the top of their list,” he says. “The partnership between K-12 403(b) plan sponsors and their vendors is important to take burdens off sponsors.”

Kiley says K-12 plan sponsors should make sure they have knowledgeable people on staff and at their providers who can deliver educational, non-product-focused messages to employees.

Smith says the pandemic changed participants’ willingness to do things a little differently. “We were previously trying to create efficiencies—to have participants use technology, have virtual meetings or scan codes on their phones,” she says. “What COVID did is get everyone much more comfortable with these things. Many individuals learned how to leverage technology because they had to.”

Smith says MissionSquare believes in the human touch but also believes in using what tools are available, and it has seen an increase in do-it-yourself planning. However, in the public sector just as in the private sector, employees are wanting more personalization, she adds. So, if they are doing more learning and planning on their own, they want websites and tools to know more about them and tell them the next best thing to do.

Smith notes that an important part of retirement planning for K-12 employees is creating a bridge between their 403(b) plan and pensions, for those that have them. She says school districts will be looking at providers to determine what kind of education and planning tools they offer.

“It’s an interesting time in the K-12 market,” Kiley says. “Traditionally, public school employees are a conservative group of savers and investors, but now they are somewhat in a state of flux. However, we’ll get through this and get them back to preparing for retirement.”

Financial Wellness for K-12 Public School Employees

Half of K-12 respondents to the MissionSquare Research Institute survey reported that they and their family have been negatively impacted financially by the COVID-19 pandemic, with 10% reporting that they have been negatively impacted significantly. Far fewer other government employees (35%) reported a negative financial impact.

When it comes to personal finances, Kiley says K-12 employees may have had a spouse or family member lose a job or get furloughed. This might have caused an employee to take a loan or withdrawal from their 403(b) plan. In addition, educators that might have been tutoring on the side for additional money could have had those jobs suspended due to the pandemic, which would affect financial and retirement security.

“We are seeing some folks who were going to retire waiting another year or so because they had to dip into their retirement savings,” he says.

Kiley says messages about overall financial wellness and not just retirement plans should be provided to employees. “Discussions about saving in 403(b) plans have become more important because of changes in government pension plans; however, we also provide financial literacy education and address things employees should be doing at different life stages,” he says. “Addressing student loan debt is one of top topics of conversations.”

Kiley adds that providers should not just offer products and solutions. “Employees tend to gravitate to representatives who give consultative advice about saving and employees’ financial goals versus those who strictly talk about plan or product features,” he says.

Smith says school districts and employee benefit advisory committees will be looking at their whole benefit package to see if it matches employees’ needs. She says she’s heard that some teachers decided to retire during the pandemic, so with younger employees coming in, school districts might need to focus on student debt repayment benefits or childcare, for example. “There is a need for overall holistic financial education targeted to different K-12 employee groups,” she adds.

Smith says one large school district she’s talked with offers help with personal savings and planning and tying health care into overall financial wellness. However, she says she thinks this is not common.

“Especially with multiple providers, school systems haven’t focused their energy on holistic financial wellness for employees. That’s where providers can help,” Smith says. “Holistic and individual planning is important to offer digitally as well as with a human touch. Everyone learns differently and is comfortable with different things. This is just as true in the public sector as it is in the corporate sector.”