PLANSPONSOR - April/May 2020 - 15

Retirement on a 2-Legged Stool
THE THREE-LEGGED stool of retirement
savings-a pension, Social Security
and personal savings-is an old prescription
for what employees need for a secure
retirement. But some workers in the public
sector are missing a leg: Social Security.
National Association of Government
Defined Contribution Administrators
(NAGDCA) Executive Director Matt
Petersen says, originally, all state and local
pensions were considered a Social Security
replacement; later, state and local governments
were enabled to opt in to Social
Security, but 15 states declined.
Josh Franzel, president and CEO of
the Center for State and Local Government
Excellence (SLGE) in Washington, D.C.,
says this translates, generally, to about
one-quarter of state and local government
employees. Some people may assume that
because these employees are covered by a
public sector defined benefit (DB) plan,
they are " set for life. " However, public DB
plans have gone through many changes
over the years.
In the wake of the financial crisis of
2008, public pension plans made several
reforms including benefit cuts, increases
in the age and tenure required to claim
benefits, higher required employee contributions
and reductions to cost-of-living
adjustments (COLAs).
Franzel says, " As DB benefits change,
public employees need to be focused on
how to adjust. "
Many state and local governments
offer a defined contribution (DC) plan
option for employees-either a 403(b)
plan or a 457(b) plan. But with employees
contributing so much to their DB plan,
is it feasible to ask them to put more into
a DC plan? " With lower salaries and the
average teacher putting 5% to 8% of his
salary into a DB plan, it gets difficult for
him to save on his own, " Petersen says.
NAGDCA members are encouraged
to promote financial literacy and meet
participants on their own terms, he adds.
In a survey, SLGE found that only
29% of respondents are offered financial
education programs by their employer.
Franzel and Petersen also say their
groups are pushing for broader availability
of automatic enrollment for public
sector DC plans. According to NAGDCA,
nine states currently allow auto-enrollment
for all public sector plans, 16 allow
auto-enrollment for some plans, and 25
forbid auto-enrollment.
A study done by SLGE, ICMA-RC
[International City/County Management
Association Retirement Corporation] and
Greenwald & Associates found 77% of
state and local government employees say
that if they were automatically enrolled into
a DC plan, they would remain in the plan.
SLGE found that auto-enrollment
succeeds in increasing state and local
government employees' retirement
savings. Take South Dakota, Franzel says.
" Even though employees hadn't had salary
increases, when auto-enrollment was
implemented, there was an 85 percentage
point difference in enrollment into the
state's 457(b) plan. " -Rebecca Moore
Remote Work Can Bring
Cybersecurity Challenges
THE RAPID SHIFT from office to remote
work has left employers questioning cybersecurity
practices. " There's a sudden need
to add cybersecurity hygiene and protocols
to the home environment that weren't
always emphasized in the workplace, " says
Ben Taylor, senior vice president at Callan,
an institutional investing firm.
While some companies may be in
good shape using secure virtual private
networks (VPNs), virtual desktops and
multifactor authentications, many have not
implemented those practices, says John
Jurik, area executive vice president at insurance,
risk management and consulting
firm Gallagher. " Others may not have
de-risked employee remote access from
personal devices over home networks, or
addressed Wi-Fi that may not be secured
like their corporate networks are, " he adds.
This unexpected relocation of office
workforces that have limited training in
preventing cyberattacks can leave these
individuals open to multiple types of
hacking-for example, spear-phishing
on personal devices, Taylor notes. The
Cybersecurity and Infrastructure Security
Agency (CISA) has released insights on
how to avoid cyber issues that have resulted
from the pandemic, including how to
protect privacy in virtual meetings, telework
and email.
Sponsors can also look to their financial
advisers and providers for support, to
develop a retirement-plan-specific cybersecurity
risk management strategy. Should
a breach occur, having a plan in place
with appropriate notices to distribute and
remediation efforts can secure confidential
information related to the retirement
plan, while allowing employers and team
members to move swiftly, Jurik says.
For the sponsor, reviewing its plan
provider's cybersecurity approach and any
updates being made because of COVID-19
could also help. " Communication between
plan sponsors, recordkeepers and advisers,
and ultimately participants, has never been
more important, " Jurik stresses.
-Amanda Umpierrez
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