An annual survey which looks at changes employers intend to make to their benefit plans in the year ahead finds that financial wellbeing and retirement readiness remain the top priorities.
Like prior years, 28% of large employers said they are most focused on addressing broad financial wellbeing of workers, while the second most popular initiative is helping participants understand their retirement savings needs and helping workers make plans to reach their retirement savings goals, according to Alight’s 2022 Hot Topics in Retirement & Financial Wellbeing report.
In fact, this year 26% of employers said they are focusing on retirement readiness, up from 20% in 2021.
The Norm, Not the Exception
Alight notes that financial wellbeing programs started gaining interest over the last five years and have reached a point where programs are the norm, with many employers looking for ways to enhance the tools and resources available to their workers. According to the report, 7 in 10 employers are creating or implementing a financial wellbeing strategy and another 17% say their strategy is fully executed.
Most employers (85%) say they are evaluating their financial wellbeing program by looking at the usage of benefits. While most tools and services are currently used by only about 5% to 10% of the workforce, there are services that have much higher take-up rates at some employers, the report notes.
There also has been rapid growth in the percentage of employers who have specific tools to help with topics like budgeting (59% now versus 35% in 2018), debt management (51% now versus 27% in 2018), and financial planning (52% now versus 28% in 2018).
Focus on DEI
Large employers are also focusing on diversity, equity and inclusion in their retirement and financial wellbeing plans. According to the findings, more than 80% of employers say they plan to focus on expanding inclusion and diversity efforts in their plans (39% very likely, 43% moderately likely). This includes steps like reviewing communication materials with an eye toward DEI, measuring financial wellness by different employee segments, and leveraging employee resource groups to discuss retirement and financial wellbeing topics.
In fact, nearly half of employers said they recently evaluated plan communications with a specific focus on inclusion and diversity. Among the remaining group, 62% said they are very likely to do so in 2022.
“For the first time, we asked employers about their plans to expand DEI in their retirement and financial wellbeing programs and the answer was a resounding yes,” said Rob Austin, head of research at Alight. “Many companies are realizing that focusing on DEI can help with attraction and retention of workers while helping promote a more equitable environment.”
Savings and Participation Rates, and E-delivery
In addition to DEI, most employers plan to focus on helping workers increase their savings rates in 2022, according to the report.
Alight notes employers have made great strides with increasing participation over the past five years. Nearly 60% of employers say they are satisfied with their participation level—an increase of 11% since 2018. And while similar strides have occurred with contribution rates (from 21% to 36%), the report suggests there’s still room for improvement. Nearly two-thirds of employers that are not satisfied with their average contribution rate say they are “very likely” to take action in 2022 to help boost their workers’ savings.
Employers are also increasingly interested in electronic delivery of participant notices and information, according to the findings. Since the Department of Labor issued the safe harbor allowing for electronic delivery of information to participants, employer interest has been high. Nearly all (98%) employers said they are interested in electronic delivery, including almost 90% that say they are “very interested.”
Mixed Feelings About SECURE
Employers have mixed feelings about the new DC provisions in the SECURE Act, according to the report.
Mind you, the survey was comprised of large employers, but, according to the findings, only 10% of respondents said they were “moderately interested” in joining a Pooled Employer Plan (PEP) and no employers said they were “very interested.”
The interest in annuities changed only marginally. When asked how interested they are in having annuities in their DC plan, 6% of respondents said they are “very interested” and 52% said “moderately interested,” up from 3% and 49%, respectively.
Employers apparently continue to have various reservations about adding annuities to plans. The most frequently cited barrier is a concern about the “operational and administrative handling” of annuities, with 67% citing it as a “major reason.” Fiduciary concerns also remain high, with 59% citing this as a major reason for not adding annuities. In contrast, employers are becoming less concerned about the cost of an annuity, likely because many employers could pass the fees along to participants, the report notes.
SECURE 2.0
Meanwhile, employers seem bullish on potential new provisions being considered as part of the SECURE Act 2.0 and other legislation. For instance, employers expressed interest in topics such as increasing the catch-up amount for people age 60 and over from $6,500 to $10,000. Here, Alight found that 58% of sponsors said they were “very interested” and another 35% said they were “moderately interested.”
Employers are also keen on increasing the starting age for required minimum distributions to age 75. The 80% of employers that said they were interested were split relatively evenly between very interested and moderately interested.
There also was an uptick in the number of employers that said they are “moderately likely” to add a provision allowing employer contributions to their DC plan for workers who make student loan payments—rising to 33% from 23% in 2021.
This year’s survey includes responses from more than 110 U.S. companies representing more than 4 million workers. The median number of workers employed by respondents was 13,000. Only 7% of respondents had under 1,000 employees.
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