PLANSPONSOR - April - May 2022 - 21

PLAN DESIGN | COVER STORY
review that finds its hourly store employees contribute too little
to the retirement plan. " So if you have a match and your hourly
retail employees are clearly having trouble meeting it, maybe
you need to rethink the match formula, " Enemchukwu says.
" Seeing that data allows you to then visualize what you're trying
to achieve and start working on how to do that. "
Plan Design Implications
Reviewing a plan from a DE&I perspective includes the data that
reveals participant behavior in the workforce's various demographic
groups. " We've long seen a number of employers that
work with their recordkeeper to cut their retirement plan data
by factors such as age, pay, tenure and gender, " Austin says. He
suggests that it can be helpful to also look at data broken down by
race and ethnicity, military veteran status and disability status.
" Once you get the data, the first thing is just exploring: Is there a
difference there among the groups? " he says.
Asked what data he would recommend focusing on, Walker
suggests initially keeping the analytics basic and simple.
" Focusing on plan inflows and plan outflows is a good place
to start, " he says. " For inflows, I'd look at contributions, account
balances, and who is and isn't maximizing the employer match.
For outflows, I'd look at loans, hardship withdrawals and other
withdrawals. And, on loans and withdrawals, I'd look at
the
frequency, the total amount and the amount as a percentage of a
participant's account balance. "
To understand how the plan is being used, says Charles,
employers will want to study the analytics of who is participating
and at what rate, as well as each person's account balance and
whether he has taken loans or withdrawals. " The other aspect
is understanding the why, " she says, of participant behavior.
Perhaps particular demographic groups in the employee population
tend to have a plan loan or two outstanding at any given time.
It is helpful to hold focus groups, or to survey those demographic
groups about why they feel they need to take loans. " If you can
understand that, it then helps in developing the solution, " she
says. " So ask employees what additional tools they need for their
budgeting, financial planning and saving for their retirement. "
Sponsors also may evaluate whether changing some plan
design elements would make their plan more equitable. It is
worth reconsidering the match from a DE&I perspective, Charles
says, particularly how it affects lower-paid employees. " You need
to be able to put in money to get an employer match, but some
individuals need to use their money for their family or for things
such as paying off their student debt, " she says. " They need that
money for something else now. "
Stretch matches have been a trend in recent years, requiring
employees to make a larger contribution to get the full employer
match. That may or may not make sense, in terms of DE&I.
Enemchukwu supports having an employer match that requires
an employee contribution, because it gets people engaged in
their retirement saving. " The problem, " she says, " is that it can
be unnecessarily complex and lack transparency, which can create
confusion and deter people from contributing what they can, especially
[being that] they would still receive part of the full match. If
they believe they can't save enough to hit the full match, that can
be a negative for their perception of the employer. A stretch match
works best for those who are financially stable and who understand
how the match works. For other folks, it can be discouraging. "
More employers also are evaluating the possibility of adding
a nonelective contribution to their plan, Austin says. " [Alight's]
research finds that about one-quarter of all the plans we survey
have some form of nonelective contribution. " If cost is a major
consideration, an employer could reallocate some of the money
it has budgeted for the match. In that scenario, the maximum
someone could get from the match would decrease, but
participant would get a new, nonelective contribution.
that
" If they believe they can't
save enough to hit the
full match, that can be a
negative for their perception
of the employer. "
To convince an organization's leadership that a nonelective
contribution is worth the expense, focus on why it makes sense
strategically, Charles says. " It goes back to really understanding
what outcome you want from your program, which is to have
your employees prepared to retire on time, " she says. " Really, it's
about [creating] that business case to have your employees build
up their financial resilience. "
Also as part of the review, sources recommend evaluating
whether a plan's automatic design features merit any changes,
to increase equitable outcomes. " For many employers that use an
automatic enrollment program, if they've had it for some time,
it's worth inspecting from this perspective, " Walker says. " Often
it's a 'set it and forget it' thing-not just for the participants, but
for the plan sponsor, too. " When keeping DE&I issues in mind,
he says, it may make sense to do a re-enrollment " sweep " of
employees who previously opted out of participating, or who are
contributing at a level lower than the plan's default deferral rate.
To Dietch, a DE&I review should not be a one-time event,
but part of a long-term effort. " When you say it's a 'review,' it
implies something that's episodic, " he says. " I would argue that
it's more of an ongoing process. And the reason it should be
ongoing is not just about an organization's DE&I policy. If you're
a fiduciary, you should always think about, 'How do I ensure that
this plan benefits its participants?' " -Judy Ward
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PLANSPONSOR - April - May 2022

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