Callan conducted a survey of plan sponsors and found that their priorities for their defined contribution (DC) plans shifted considerably due to the pandemic.Sixty-nine percent of sponsors said they are now most interested in supporting their employees’ immediate financial needs.
In years past, employers’ overriding priority has always been “aspirational goals for their total benefits or total rewards,” Jana Steele, senior vice president, Callan, tells PLANSPONSOR. “With the pandemic lockdown and ensuing layoffs and salary reductions, immediate financial needs are now forefront in employers’ minds. This includes debt management, and emergency savings, be it inside or outside the DC plan.”
Plan sponsors said their other top concerns were increasing employee communications (51%), modifying how financial education and counseling take place (35%), reviewing participants’ investment behaviors (33%), reviewing cybersecurity protocols since many employees are now working from home (33%), becoming more concerned about their employees’ retirement readiness (31%) and cutting plan costs (14%).
Steele says plan sponsors were motivated to boost employee communications to quell fears at the onset of the pandemic, when the stock market valuation dropped so much. “They also wanted to educate employees about the CARES [Coronavirus Aid, Relief and Economic Security] Act and the long-term consequences of taking money out of their retirement plans and hurting their financial futures,” she says.
The CARES Act also permitted employers to make student loan repayments, so some plan sponsors wanted to make sure they communicated that to their employees, Steele says.
Sponsors also increased their governance oversight of plans due to the pandemic, and there was a 20% increase in the number of committee meetings last year. Virtual committee meetings were up by 86%, while in-person meetings decreased by 62%.
Prior to the pandemic, 11% of committee meetings included internal legal counsel; that rose to 56% in 2020. The top areas of fiduciary focus were governance and process, investment structure evaluation, and fund manager due diligence.
For the coming year, sponsors’ retirement plan committees aim to review plan fees, conduct formal fiduciary training for members, and update or review their investment policy statement (IPS). Plans that don’t currently have an IPS intend to implement one.
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