PSNC 2021: Plan Design Elements to Improve Outcomes

Now that the worst of the coronavirus pandemic has lifted and work has largely returned to normalcy, so too has retirement plan sponsors’ commitment to finessing plan design.

Kicking off an information-packed week during this year’s virtual PLANSPONSOR National Conference (PSNC), the “Plan Design Elements to Improve Outcomes” session revealed that, post-COVID-19, sponsors have been recommitting to running robust plans.

Plan design elements are critical to improve outcomes,” said Joshua Ulmer, executive director, Graystone Consulting, and moderator of the panel. He added that every so often, and at least once a year, “plan sponsors should evaluate their plan’s design to make sure the plan meets its goals and is attractive to attract, retain and retire talent.”

Ulmer reminded the audience of some of the devastation that people have experienced from the pandemic. He said sponsors should not just think about its death toll worldwide, but how it caused millions of Americans to lose their jobs and join long lines at food banks. This has resulted in some people depleting their retirement savings, and others not being able to make contributions, Ulmer continued.

A Different Retirement for Everyone

Asked what critical plan design decisions StoneStreet Renaissance has learned throughout the COVID-19 pandemic, founder Barbara Delaney said StoneStreet was already re-evaluating its approach to plan design before the pandemic hit in early 2020, particularly to make it easier for participants to access their 401(k) funds throughout their working careers.

“We were looking at 401(k) plan design in very different ways,” Delaney said.

Then, during the pandemic, StoneStreet advisers began paying particular attention to how COVID-19 was morphing people’s future retirement plans. Relying on the findings of Franklin Templeton’s “Voice of the American Worker Study,” which itself relied on findings from the Harris Poll, Delaney and her partners discovered some fascinating developments, validating what they already knew to probably be true, she said, particularly with respect to “the way Americans view retirement and how that is changing. Eighty-eight percent said retirement now looks different for everyone. One size does not fit all.”

Of particular concern: The pandemic revealed that 80% of participants don’t have an emergency savings plan. StoneStreet is now recommending that all of its plan sponsor clients “use an after-tax bucket as a means” to help workers without emergency savings to build it up, she said.

Further findings, Delaney continued, also revealed a big problem: In the absence of emergency savings, many participants, through the guise of the coronavirus-related distributions (CRDs), were taking large sums of cash out of their retirement savings. That pointed to “a big void of financial advice” which StoneStreet is now aggressively filling with the endorsement of managed accounts. For Stone Street’s plan sponsor clients, “these are taking a much different role going forward,” she added.

Akin Gump Strauss Hauer & Feld LLP—winner of the PLANSPONSOR of the Year Corporate 401(k) >$300MM-$1B category—made a conscious decision, as the pandemic began to lift, to return to its advocacy for automatic features, said Jessica Chicorelli, director of financial benefits at the law practice.

While Akin Gump has been advocating for auto-enrollment and auto-escalation in its own retirement plan since 2015, the pandemic and the lack of emergency savings made these features seem all the more critical to the retirement committee, Chicorelli said. The law firm not only recommitted to the importance of these two features, but it also recognized the value of reenrollments for longer-tenured employees, as well as holding the company’s match and profit sharing steady, Chicorelli indicated.

“We want to get people back on track with their retirement plan,” she said.

Health and Wealth

With COVID-19 being such a threat to so many around the world, Akin Gump also took up the mantle of helping its employees with both health and wealth, Chicorelli continued.

Yet another lasting change to come out of the pandemic is that “customers, prospects and consultants are now looking at financial wellness holistically,” said Angela Winingham, associate vice president, market development and participant adoption at MetLife, where she advocates for the use of annuities for retirement plans.

“We also learned about the importance of providing certainty in times of uncertainty, and steady income,” she said. “The outcome of a qualified plan is income and preserving assets at retirement. A recent MetLife survey found that 78% of plan sponsors are re-evaluating plan design.”

Asset managers and recordkeepers were also very busy in the early days of the pandemic helping plan sponsors make fast decisions in light of the Coronavirus Aid, Relief and Economic Security (CARES) Act, said Nathan Voris, senior managing director, business strategy at Schwab Retirement Plan Services. This put call center reps to the test, as people had “so many varied experiences” to the pandemic, he said.

Of course, some people were able to maintain personal computer-based, professional services jobs from home, while many of those in the hotel, travel and restaurant industries lost work.

As Winingham pointed out, a MetLife survey found that 20% of Baby Boomers decided to delay retirement during the days of the pandemic, while 10% decided to retire early, coming to the conclusion that “life is just too short.”

The panelists said that those varied experiences mean participants will be looking for different things from their retirement plans, as well as more personalized approaches that adapt to their needs.

Voris added: “The same personalization that folks experience outside of our space [i.e., Amazon, Google analytics], that has to come to our world” of retirement planning.