PLANSPONSOR - August/September 2021 - 28

2021 PLANSPONSOR NATIONAL CONFERENCE
the cheapest provider all the time. "
A rule of thumb is to stay alert to developments and new
services in the industry, Rosenbaum said. Do not be that sponsor
that " gets into a five-, six-, 10-year comfort zone, " he said. -LB
'Investing Lessons From
An Aging Workforce'
The Late Baby Boomers-that part of the generation born
1960 through 1964-was hit hard by the global financial crisis
(GFC) of 2007 and 2008 and the COVID-19 recession. However,
some of that vulnerability could be self-inflicted, Capital Group
contends. On the cusp of retirement, many of these investors
might have over-allocated to equities in a last-ditch attempt to fill
the gap in their retirement savings-the exact opposite of what
they should have done.
In " Investing Lessons From an Aging Workforce, " presented
by Capital Group, home of American Funds, Naomi Fink, retirement
economist within Capital's Institutional Analytics Group,
noted that Late Boomers had less saved when the GFC occurred
than previous generations had saved at their age: an average
defined contribution (DC) account balance of $29,963. " Why
they saved less is a great mystery, because of concerns about
Social Security and the disappearance of DB [defined benefit]
plans, " she said.
The Center for Retirement Research at Boston College
(CRR) found that, on top of this, many Late Boomers experienced
job losses or had lower earnings during the crisis, which
has exacerbated the problem.
" Job losses and lower earnings can affect retirement savings.
One way the effect can be shifted is through a boost in earnings
or by working longer, " she said. Fink called job and earning status
a person's " human capital " and said boosting this should be Late
Boomers' priority over just focusing on saving.
Many in this generational group have also made bad investment
decisions. " Anecdotally, they weren't contributing during a
job loss. Then they went back to work with lower wages, so, to
make up for lost time, they invested in equities, "
Fink said, noting that people this age should be
shifting from equities to bonds, even when a
job loss has occurred.
A job separation often leads to lower
earnings, Fink said, " and this downward
motion of human capital doesn't change.
They need to use effective strategies to make
up for that. "
To make the retirement plan more effective
for all employees, Chris Anast, senior retirement
strategist with the Institutional Analytics Group at
Capital Group, said, use automatic plan features, such as autoenrollment
and auto-escalation. " It's important to get people
into the plan, " he said, adding it is also important to keep money
from leaking out.
28 PLANSPONSOR.COM August - September 2021
" Those without emergency savings are more apt to take a
withdrawal, so encouraging emergency savings, either through
the employer or not, will help, " she said. " Similarly, education and
aid with managing student-loan and other debt will help participants
avoid withdrawals [from their retirement plan]. " She also
suggested implementing a holistic financial wellness program.
Additionally, other investment temptations can lure preretirees,
Anast noted and cited, for example, last year's GameStop
incident, where the company's stock price skyrocketed after
amateur traders in a Reddit forum invested in the stock to drive up
the price. " Plan sponsors should educate participants about how to
keep from falling for [these short-term spikes], " he said.
Ohio DC made a point to communicate about the GameStop
incident, Elliott said. " People don't make the best decisions when
in a crisis, " she said. " Outside investing and outside investing
tools are not bad things, but if participants don't understand the
basics of finance, they can get into trouble. "
Financial wellness programs and communications help
participants focus on what is important, Elliott added. Ohio DC
partnered with a group that provides customized messaging on
financial wellness that is " smart, ethical and specific, " she said.
Fink said asset-allocation funds such as target-date funds
(TDFs) also help participants with investment decisions.
" Sometimes they help people 'do nothing,' which is sometimes
the best thing. " -Rebecca Moore
Loans have not been an issue for the Ohio Public Employees
Deferred Compensation Plan (Ohio DC), said Christina Elliott,
executive director of the plan, as it has no loan program.
However, in light of the pandemic, Ohio DC considered the
Coronavirus Aid, Relief and Economic Security (CARES) Act
and what it could adopt from the act to help workers through
the COVID-19 crisis.
" We saw more unexpected emergency withdrawals than
we've seen in the plan's history, " she said. " There weren't job
losses with our employees but with their families, and also some
employees and their families had health issues due to COVID. "
To discourage participants from taking money from the plan,
Fink said, plan sponsors should educate them about the pitfalls of
doing so-and about being prepared for the unexpected.
Job and earning status comprise
a person's " human capital, "
and boosting this should
be Late Boomers' priority
over just focusing
on saving.
-NAOMI FINK
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