PLANSPONSOR - December/January 2020 - 36

FEATURE | ON THEIR OWN TERMS
(Continued from page 34) level of funds they will need to pay for
what will likely be a three-decade retirement. Retirement plans
that have the appropriate design, tools and messaging may find a
receptive audience in their youngest members.
A quality plan that meets the needs of Millennials may also
provide a competitive advantage to employers in today's tight
labor market. A recent survey from Lincoln Financial Group
found that nearly two-thirds of Millennials said they would
require a retirement plan as part of their benefits package.
Among the plan features named in the survey, a matching
contribution, though not essential, ranked as the most important
priority in accepting a job.
Sources recommend the following strategies to help
Millennials increase their savings:
1) Use More Automatic Features
Automatic enrollment and automatic escalation have proven
beneficial to all generations, but Millennials in particular have
responded well to such features. Millennial participation
in 401(k) plans increased by 82% in the last
decade, due in part to the adoption of auto-enrollment,
says research from Fidelity Investments.
Auto-escalation as well as auto-rebalancing and
auto-re-enrollment could further boost Millennial
retirement prospects.
participate in the company 401(k) plan, are apt to have multiple,
low-balance accounts at former employers. Liquidation rates
remain high among Millennials, so sponsors that want to prevent
leakage need to make it easy-even automatic-for employees to
roll older accounts into their current one, says Vanguard's " How
America Saves 2019. "
4) Implement Multi-Device, Holistic Tools
Millennials consume nearly all of their media digitally, and most
are comfortable with online financial transactions, whether to
repay their students loans, refinance their mortgage, or split a
check for dinner with their friends. They also expect instant
accessibility to any online account-financial or otherwise-via
any device they choose.
Plan sponsors that can offer a user-friendly, multi-device
experience to participants have an opportunity to connect and
deliver relevant messaging in a meaningful way. Given the
complexity of Millennials' financial lives, the most useful tools
2) Assist With Non-Retirement Goals
Saving for retirement ranked fifth on a list of
top financial priorities among 30-somethings
surveyed in 2017 by Willis Towers Watson. The top goal was to
pay off debt, then to cover day-to-day expenses, pay for housing
and build an emergency fund. Corroborating the problem, a 2018
Society of Actuaries (SOA) study found that 64% of Millennials
reported a financial planning horizon of 12 months or less.
If employers can ease some of the group's non-retirement
financial pressures with plan elements such as student loan
repayment assistance or a sidecar emergency account, that
might free up some income-as well as some mental space-to
think about retirement planning.
" We've seen a few programs where plan sponsors have
rolled out student loan payment programs in conjunction with
the traditional savings plans, " says Ross Bremen, a partner in
the defined contribution (DC) practice of NEPC LLC in Boston.
" If participants show that they're paying back their loans, the
companies will match the student loan payments. "
3) Recognize Millennials' Shorter Job Tenure
Workers hold an average of 4.5 jobs between the ages of 25 and 34,
according to the Bureau of Labor Statistics, and neither Millennials
nor their employers typically expect they will stay with any one
employer for more than a few years. That makes an employer
match requiring five years to fully vest a far less valuable tool.
Shorter job tenure also means those employees who do
36 PLANSPONSOR.COM December 2019 - January 2020
... A MATCHING CONTRIBUTION,
THOUGH NOT ESSENTIAL, RANKED
AS THE MOST IMPORTANT PRIORITY
IN ACCEPTING A JOB.
take a holistic approach, such as a dashboard that can show
participants not only their 401(k) balance, but also their health
savings account (HSA) and debt balances, and progress toward
financial goals.
" Millennials need to stop looking at the 401(k) as solely tied
to one employer and solely for retirement, " says Jack Towarnicky,
executive director of the Plan Sponsor Council of America
(PSCA) in Arlington, Virginia. " The messaging needs to be that
your 401(k) is not your employer's plan and that money is in a
separate, legal entity that's yours. Your relationship with that
plan doesn't end when your employment ends. It can be a lifetime
financial instrument. "
5) Offer ESG Options
While some Millennials are perfectly happy to stick with the
target-date funds (TDFs) in which they have been auto-enrolled,
many are also interested in being more mindful about their
investment choices. Plan sponsors that can make environmental,
social and governance (ESG) investments available to
participants may see higher engagement among Millennials. A
recent study by Natixis found that 71% of this group said they
would invest in their plan for the first time or increase their
contribution rate if they saw they had access to responsible,
sustainable investments. -Beth Braverman
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