The vast majority of U.S. employers are eyeing enhancements to their defined contribution pension plans in an effort to boost their employees’ retirement security and financial well-being, according to a new survey by WTW.
It found 75 per cent of DC plan sponsors made a change to their plans in the last two years and expect to make at least one change over the next two years. An additional 14 per cent that didn’t make a change over the last two years plan on making at least one change over the next two years. Most of the expected enhancements will focus on the employee experience (82 per cent) and financial well-being (78 per cent), while 64 per cent said they expect to make changes to their plan design.
“Employer interest in helping employees address both their short- and long-term financial concerns has never been greater,” said Alexa Nerdrum, managing director or retirement at WTW, in a press release. “To that end, employers are refreshing their DC plans to give employees both the opportunity to save more for retirement and the flexibility to use both their personal and employer contributions in innovative ways to manage their financial needs.”
Indeed, 28 per cent of survey respondents said they expect to make changes to their plans’ automatic deferral features, while 38 per cent said they expect to adopt an innovative contribution strategy. These include allowing participants to use their contributions to reduce student loan debt or directing contributions to an emergency savings fund or a health-care savings account.
Employers are also continuing to explore ways to integrate their DC plan strategies with enhanced financial well-being and resilience support, with roughly four in 10 respondents planning or considering this step on top of 42 per cent that have already done so.
The vast majority (92 per cent) said they offer or expect to offer access to personalized support, while 91 per cent said they use or expect to use targeted communications tailored to specific workforce segments. A similar percentage (91 per cent) said they offer or expect to offer digital tools to help employees with budgeting and spending.
In addition, 55 per cent of respondents said they expect to have attraction and retention issues over the next two years, with 36 per cent of this group saying they consider their DC plan as an important tool to attract and retain employees. More than a third (35 per cent) of employers that expect attraction and retention issues also expect to differentiate their DC plan from other organizations in their sectors.
“Employers have a golden opportunity to leverage their DC plan and gain an advantage in attracting and keeping talent,” said Dave Amendola, senior director of retirement at WTW, in the release. “Our research shows that employees prioritize flexibility and choice in their benefits package, view retirement benefits as a key reason to join or stay with a company and want more help from their employer with planning for a financially secure retirement.
“Employers that enhance their DC plans with features that target these preferences can better meet their employees’ needs while differentiating themselves as a true employer of choice.”