Hard work for plan sponsors as they adjust to new realities

(Photo: AYAimages/Adobe Stock)

The second-quarter Principal Retirement Security Survey recently checked the pulse of customers, employers, financial professionals and consultants to gain insights into timely topics. The survey findings explore plan sponsors’ concerns and actions surrounding saving for retirement, financial behaviors related to market volatility and COVID-19.

Top objectives and concerns for plan sponsors

The survey first looked at the top objectives of plan sponsors.

Offering retirement benefits. Plan sponsors’ top reasons for offering retirement plans to employees are to help encourage them to save for retirement, to help provide financial security to them in retirement and to help retain current employees.

Although sponsors believe their employees value and appreciate the retirement plan, only one-third are confident their employees are doing a good job of preparing for retirement and will be able to achieve financial security in retirement.

Plan objectives and concerns. Plan sponsors’ top plan objectives are focused on increasing participant engagement, increasing their participation rate and staying in compliance with related fiduciary responsibilities.

Their concerns are focused on ensuring that plan fees are reasonable and that employees have enough money saved to live comfortably in retirement.

One-fourth of plan sponsors indicate there is increased focus on plan costs and fees since the pandemic started. When considering the economic outlook for the next year, half of plan sponsors are optimistic while four in 10 remain cautious.

Features of interest to plan sponsors

It also asked about retirement readiness and financial wellness.

Financial wellness impact on retirement readiness. Nearly nine out of 10 plan sponsors agree that increasing employees’ financial literacy will increase their retirement readiness. Eighty percent also agree that offering financial wellness resources will increase their retirement readiness. More than two-thirds of respondents believe they have some responsibility in helping their employees with this.

Plan enrollment is going well, but retirement income planning needs work. Plan sponsors believe they are doing a good job of enrolling employees in the retirement plan. Sponsors also believe their employees need help making decisions with their account at retirement or job change, and with planning for income in retirement.

Potential features of interest. Three in 10 plan sponsors are interested in offering a solution to enroll participants into an IRA if they want to continue saving beyond the IRS maximum each year. Automatic enrollment of Generation Z employees into financial literacy education is also of interest.

Automated plan features was another survey topic.

Plan success. Nearly six in 10 plan sponsors indicate that automated features have a positive impact on plan success. Among plan sponsors who offered automated features as part of their retirement plan, 87 percent saw an increase in overall plan participation and 80 percent felt that employees started to save for retirement at a younger age.

Workforce challenges

Finally, the survey asked about workforce challenges.

Adding staff. Three in 10 plan sponsors have experienced an increase in employee turnover during the past six months. Also during this time, one-third of plan sponsors have reviewed and modified work arrangement options for staff.

For the remainder of 2021, nearly half of plan sponsors intend to keep staffing levels the same, replacing staff only if they retire or leave the company. Four in 10 plan sponsors intend to add staff throughout the year.

Ending on a positive note, more than half of employers are optimistic about the economic outlook for the next 12 months, which is a significant increase over the first quarter.