Surveys indicate that almost 75% of sponsors may be making such a decision in the near term. Almost all sponsors would like to include options for their employees that guarantee income in retirement. Yet, a poll by found that 58% of adults understand that annuities are retirement savings products, but 42% of them do not understand the details of annuities.
Employee education is often a topic plan sponsors or the employer delegates to vendors, such as a plan administrator. However, recent surveys indicate plan sponsors are opting for plan design changes. It is possible that linking employee education programs to these changes could facilitate those changes. To be clear, employee education programs are vast and varied, but can include as lunch time webinars, asynchronous education programs through Skillsoft and other employee education platforms, or through shared drives such as SharePoint. Here are three important trends plan sponsors have indicated through surveys they plan to approach in the next two years and a matched employee education topic.
Overall, almost half of employees and plan participants have reported that they do not receive guidance from others on their investment and savings decisions, a drop from 63% in 2021. Surveys have also shown that more employees are relying on their own research to make budgeting and investment decisions. More than half of all employees have not made an estimate of the total they need for retirement, an important part of retirement savings planning. When they do, it is most often from family members or work colleagues.[1] That leaves a significant gap in need for advice and options for getting it. Employees also think their employers should help them with basic financial wellness.
This gap can amount to employees being ill-prepared for retirement, even though a high percentage of sponsors believe it is their responsibility to assist employees with retirement savings. Many employees cannot weather price spikes or an unexpected expense. As a result, they draw on their 401(k)s. 40% of plan participants do not have an emergency savings account that can function for most crises.[2] Emergency savings accounts can help, but when surveyed in the recent past, only 13% of plan sponsors indicated emergency savings as a top priority in the next 12 months.[3] Given that auto-enrolling employees in emergency savings accounts could potentially affect plan testing, sponsors may be holding back on prioritizing them for important reasons.
While important, emergency savings accounts are not a sufficient solution for most employees to fix their retirement savings issues. Instead, many employees may need help understanding savings, credit cards, and other key budgeting issues. Four out of ten participants have not built an adequate emergency savings fund. Employee education programs on topics such as basic budgeting or how to manage debt can be useful. So too can providing budget tracking forms on shared sites, such as SharePoint.
Employee education could help plan sponsors with key elements of benefits as a retention tool. For example, when asked about their top benefits for recruiting and retention, plan sponsors noted the expected answers (health insurance, defined contribution plans) DC plans (68%) as well as a handful of other benefits employees could provide great benefits to employees, such as life insurance, health savings accounts, and disability insurance. For employees struggling with catching up on retirement planning or worried about providing for their families in the event of a crisis, these benefits can be extremely helpful. But only when employees understand their use. Plan sponsors can boost their benefits as key retention items by helping employees understand the impact those benefits have. In fact, some life and disability insurance plans may decrease in cost with a greater enrollment by employees, effectively saving money for plan sponsors by a little educational effort.
Lastly, many sponsors are now thinking of including annuities as an in-plan option. Surveys indicate that almost 75% of sponsors may be making such a decision in the near term. Almost all sponsors would like to include options for their employees that guarantee income in retirement. Yet, a poll by found that 58% of adults understand that annuities are retirement savings products, but 42% of them do not understand the details of annuities. It is possible that by providing education sessions on how annuities can benefit employees in retirement planning could boost employee satisfaction when sponsors do add these options to their in-plan line up.
[1] https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/RI-PPSR-24.pdf
[2] https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/RI-PPSR-24.pdf
[3] https://www.capitalgroup.com/advisor/insights/articles/plans-sponsors-top-concerns-2023.html
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
get xpress proposal
