So far, few plan sponsors have incorporated provisions of the Setting Every Community Up for Retirement Enhancement (SECURE) Act in their retirement programs, and not many of them say they are likely to adopt them this year, according to Alight Solutions’ “Hot Topics in Retirement and Financial Wellbeing 2021” report.
Just 5% of plan sponsors surveyed said they already allow employees to withdraw up to $5,000 from their retirement plan accounts for the birth or adoption of a child, while 15% said they were very interested in the provision. Forty percent indicated they are moderately interested in allowing employees to withdraw up to $5,000 for the birth or adoption of a child, but another 40% said they are not at all interested in this provision.
Only 1% of plan sponsors surveyed said they are very interested in joining a pooled employer plan (PEP), and only 4% are moderately interested. The rest indicated they are not at all interested in joining a PEP.
PEPs have been touted as a more cost-effective way for employers to offer a retirement plan to employees, especially for small employers. In addition, they take much of the administrative burden of running a plan away from employers. However, industry sources say there are many things for plan sponsors to consider before moving from a single-employer plan to a PEP.
Provisions of the SECURE Act also attempted to quell plan sponsors’ concerns about offering guaranteed lifetime income options for participants in defined contribution (DC) plans. For one thing, the legislation provides a fiduciary safe harbor for selecting an insurer/vendor of guaranteed retirement income contracts. However, the Alight Solutions report shows that more than one-third (37%) of plan sponsors are not at all interested in offering annuities in the DC plans, and only about half (49%) are moderately interested.
Only 3% of plan sponsors indicated they are very interested in offering annuities in their DC plans. Twelve percent of respondents said they already do so.
Three-quarters of plan sponsors surveyed said fiduciary concern is still a reason they don’t intend to offer annuities in their DC plans. Alight Solutions notes there are many other obstacles that remain before sponsors will add annuities to their plans. For example, 89% expressed concern about the operational or administrative procedures of having annuities, three-quarters said they have concerns about the percentage of participants who will use annuities, and 70% cited difficulty with participant communications.
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