By Pension and Benefits Editorial Staff
Fidelity Investments has revealed that many plan sponsors believe their employees are falling short in their retirement savings. According to the 10th edition of Fidelity’s Plan Sponsor Attitudes Study, while 62% of sponsors said their employees expect the plan to meet all of their funding needs in retirement, only about half (55%) said they believe their plan participants are actually saving enough in the plan to retire. As a result, most plan sponsors have reported making a change to their plan design or investment menus in the past two years. The study, which began in 2008, surveyed employers who offer retirement plans that use a wide variety of recordkeepers.
Fidelity’s study also found that nine in ten plan sponsors reported that they have had employees work past their desired retirement date. Seventy-three percent of sponsors acknowledged that there are costs when employees delay retirement, including increased benefit costs (37%), reduced mobility for younger employees (33%), challenges for strategic workforce planning (31%), and lower productivity (27%).
“Plan sponsors recognize the increasingly important role they play in helping their employees reach retirement, and it is a ‘win-win’ situation when they can help their employees reach their financial goals,” according to Jordan Burgess, head of specialist field sales overseeing defined contribution investment only (DCIO) sales at Fidelity Institutional Asset Management. “Plan sponsors are balancing both company and employee needs, and they’re looking to plan advisors to help them better understand the complexities of a retirement plan in order to meet those combined goals.”
The top two reasons plan sponsors hired advisors were (1) to understand how well the plan is working for employees and how to improve it (27%), and (2) for help with the increasingly complicated process of managing a retirement plan (26%).
Plan sponsors’ relationships with plan advisors have changed. With ten editions of the Plan Sponsor Attitudes Study, Fidelity looked back at how plan sponsors’ relationships with plan advisors have changed over the years.
“About a decade later, more plan sponsors are seeing the value of working with advisors, and satisfaction is significantly higher,” Burgess acknowledged. “What hasn’t changed is that sponsors continue to re-evaluate their advisor relationships, especially as their plans’ goals evolve. Advisors should be proactive by looking for opportunities to differentiate their offering.”
Opportunities for improvement. This year, plan sponsors reported that they are actively seeking improvements to their plans: three-fourths of sponsors reported making a change to their plan design or investment menu in the past two years. The top plan design changes were to increase the match (26%) or add a match (24%). The top menu change was to increase the number of investment options, consistent with last year’s study.
It also appears that sponsors are reviewing plan performance more often, with a shift away from annual reviews (14% in 2019 versus 27% in 2018) to quarterly reviews (45% in 2019 versus 38% in 2018). This is an opportunity for advisors to play a more active role as sponsors may seek more frequent check-ins.
Looking beyond retirement at full financial picture. Retirement savings is just one aspect of an employee’s financial picture, according to Fidelity. Fidelity research has found that 36% of employees have less than three months of income saved in case of emergency and that absenteeism is 29% higher among employees who do not have enough emergency savings. Plan sponsors and plan advisors are in a position to support employees throughout their career, and many see the value of implementing programs to improve employees’ overall financial wellness.
This year’s Plan Sponsor Attitudes Study found that more than half (56%) of sponsors said they offer financial wellness programs, and 59% saw them as very impactful for employees. Advisors have helped sponsors implement these programs. For instance, two-thirds of sponsors said that advisors discussed financial wellness programs with them. Additionally, plans with advisors were more likely to have them in place than those without advisors (57% versus 43% respectively), according to Fidelity.
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