The majority of defined-contribution plan sponsors are interested in adding features that would help employees build emergency savings and pay down student loans, according to new data published Monday.
Most plans do not include such options, but employers have become receptive to financial wellness over the past several years, according to the report from Willis Towers Watson, which surveyed more than 460 of its clients in September.
While about a quarter of respondents said they have Roth or similar features alongside the traditional DC plan that let their workers build emergency savings, 19% said they are extremely interested in such an addition, and another 41% said they are at least somewhat interested.
Only 14% of sponsors said they were not inclined to add an emergency-savings feature, according to Willis Towers Watson.
There was even more enthusiasm for student loan or other debt features. Only 2% of respondents said their plans have options such as helping workers pay down their student loans and also save in the company’s retirement plan.
Since the Department of Labor clarified several years ago in a private guidance letter that sponsors can make “matching” contributions for workers who are paying down loans but not contributing on their own to the plan, some employers have added similar arrangements. But more are considering it: 19% said they were highly interested, and another 59% said they had moderate interest, according to the survey results. Twenty percent said they were unlikely to add student loan or other debt assistance features.
Lifetime income
Largely considered as the next frontier in DC savings, lifetime income options are present in relatively few plans. About 16% include annuities or other options in-plan, and another 6% include it as an outside feature, such as a retail annuity, according to the report. Fifteen percent of respondents said they are at least considering adding in-plan lifetime income and 10% said they are considering out-of-plan commercial options.
The DC industry is anticipating a slow rise in interest from plan sponsors as a result of the SECURE Act, which sought to make it easier to add annuities to 401(k)s and is requiring annual account statements to include lifetime income estimates based on a participant’s balance.
Product and service providers have been bringing lifetime income options to the market.
Empower Retirement rolled out a service several years ago that can gradually shift participants’ assets from target-date funds to managed accounts at a given age or other milestone.
On Monday, TIAA announced that it now has 100 clients using its RetirePlus service, which has the option of including annuities and can be used as the qualified default investment option. The service launched in 2018.
The Willis Towers Watson survey also found that three quarters of plans have benchmarked their administrative fees over the past three years. Among those that did, two thirds were able to negotiate lower costs, according to the report. And a third of plans that benchmarked investment management fees also saw costs decrease.
More plans also indicated they are working with investment consultants who have full discretion to choose funds. Just 6% of plans had that 3(38) fiduciary relationship in 2017, although it was 15% in the recent survey. Meanwhile, the percentage of plans that take investment advice in a co-fiduciary 3(21) relationship fell, going from 81% to 72%, according to Willis Towers Watson.
About 12% of employers said they cut back on matching contributions this year or eliminated them entirely — a tactic that many have used to help deal with lower revenue as a result of the pandemic.
However, most of them said they are planning to reinstate the match, according to the survey results. Twenty-one percent said they had already done so, while another 13% said they would do so before year end. Meanwhile, 43% said they would reimplement matching contributions next year.
New chief executive Rich Steinmeier replaced Dan Arnold on October 1.
The global firm is navigating a crisis of confidence as an SEC and DOJ probe into its Western Asset Management business sparked a historic $37B exodus.
Beyond returns, asset managers have to elevate their relationship with digital applications and a multichannel strategy, says JD Power.
New survey finds varied levels of loyalty to advisors by generation.
Busy day for results, key data give markets concerns.
A great man died recently, but this did not make headlines. In fact, it barely even made the news. Maybe it’s because many have already mourned the departure of his greatest legacy: the 60/40 portfolio.
Discover the award-winning strategies behind Destiny Wealth Partners' client-centric approach.
