PLANSPONSOR - December 2021 - January 2022 - 4

Heading for the Exits
INSIGHTS
H
ow has the " Great Resignation " impacted your world?
Has it affected your retirement plan and other benefits-and
will it continue to do so in 2022?
So much has been made lately of people leaving their
jobs, but it is not one inclusive group that's heading out the
door. There are job changers, and then there are those who
leave the workforce completely. Just how big is that second
group of people who don't intend to return or actively look for work? The Pew
Research Center says it was 4.2 million between February 2020 and February 2021.
Many of those leaving are deciding to retire, at a different date than they
originally intended. In its May 2021 " Report on the Economic Well-Being of U.S.
Households in 2020, " the Federal Reserve noted that 29% of adults who retired in
the previous year said factors related to COVID-19 contributed to when they retired.
And not all those exiting the workforce align with the image of someone being
carefree and running into the sunset (yes, I have seen those images accompanying
these stories). Nearly four in 10 people in the U.S. (39%) are worried about running
out of money during their retirement years, and only 41% have a " high " score on
the latest Aegon Retirement Readiness Index, which measures attitudes and behaviors
about retirement planning that contribute to preparedness. As I read into the
numbers of this, for Baby Boomers, the Great Resignation is only reinforcing what
we've known from Employee Benefit Retirement Institute (EBRI) data for years:
When people retire earlier than planned, it is usually due to outside circumstances.
However, when thinking about what the past two years have meant for those
who have exited the workforce and might have entered " retirement " before they
intended to, I have to question what this means for plan sponsors, as far as employee
expectations and money moving from plans.
Specifically, I think of all the emphasis we now put on crafting savings as
retirement income. Participants will need to understand what they have and how
to access it. When people retire earlier than expected, all the planning and the
assumptions about income and spending that appear on the statements they've
been getting goes out the window. It's likely to breed some confusion for them,
which might lead to plan sponsors being asked to answer some questions.
Also, as people leave the company, sponsors must consider what will happen
to those participants' plan assets. Will they stay in the plan or will participants
move them out? For me, it's hard to think that most participants receive any benefit
from rolling their money out of a plan, where they generally have lower investment
costs, and into an individual retirement account (IRA) with retail-priced investment
options. I think plan sponsors are good to encourage assets to stay in the plan.
Oftentimes the oldest participants have the largest balances; if you have a large
exodus of older employees, will that money move? Will a decline in participant count
or assets affect pricing or services from your recordkeeper, adviser or other providers?
Sponsors cannot control what their employees do, but they can control the
dialogue they have ahead of participant departures to help minimize the disruption
to the plan and the questions and uncertainty that come after. If there isn't a
communication plan currently in place to get participants to think about these types
of questions and encourage them to put their savings into perspective, perhaps
2022 is the year to make it happen. -Alison Cooke Mintzer, Publisher
4 PLANSPONSOR.COM December 2021 - January 2022 Silver Orchid Photography
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