State of the Industry
This year’s survey turned up many differences between DC plans—but a load of similarities, too
COVID-19 has been the dominant force affecting nearly every aspect of life this year—including retirement plans. Experts say retirement plan legislation, litigation and education have been the other big focal points for the industry in 2020 and will influence thought about financial wellness going into ’21.
The 2020 PLANSPONSOR Defined Contribution (DC) Survey was fielded in late summer and early fall, at least six months into the pandemic, and our analysis starts with the impact it has made. Besides asking about COVID-19, we also moved beyond our traditional explorations to learn plans’ responses to several headline topics, including the broad growing approval for environmental, social and governance (ESG) investment and the new safe harbor provision that has eased implementation of systematic withdrawals.
“Plan sponsors are starting to understand the anxiety their employees are facing,” explains Stan Milovancev, executive vice president at CBIZ Retirement Plan Services in Cleveland. “The pandemic has highlighted that these workers have a lot of financial stress, and that stress affects mental health, physical health and any relationships in their lives.”
For many plans, employing the traditional strategies they followed pre-COVID, yet factoring in what they have learned since, may be the way to go, next year.
Ed Farrington, executive vice president with Natixis Investment Managers in Boston, says it is important for plan sponsors to maintain good communication and educational practices for the employee base as they look to next year. For instance, if a sponsor offers an employer match contribution or has reinstated a match, communicate to workers what that match could mean in compounded savings, Farrington says. And if they have yet to adopt automatic plan features such as auto-enrollment, sponsors should consider doing so.
Fifty-one percent of respondents to our survey currently use auto-enrollment.
“It’s these small plan features that should be on everyone’s mind—that will recreate [a] sense of wellness,” says Farrington. “These are all things you can do without tremendous overhaul of the plan.”
As there is still room to expand utilization of auto-enrollment throughout the industry, there is also room to increase participant education about basic financial concepts. The survey indicates that 53% of respondents offer their employees education about saving.
Milovancev urges employers to upgrade or reselect their plan features, retirement-planning and financial wellness tools, and service providers now instead of waiting until another coronavirus wave. “I would tell my clients to not forget how you and your employees felt a couple of months ago. Just because things have calmed down a bit, use this time to prepare for a stronger 2021,” he says.
“Understand who is going to help you in the longer term,” he adds. “Who will help your [workforce], and how will they help your organization be more successful? Maybe it’s your recordkeeper or adviser. Tools like this survey, too, can help plan sponsors make good, informed decisions to help their employees.”