PLANSPONSOR - February - March 2022 - 36

PARTICIPANTS SPECIAL ISSUE | PLAN DESIGN
Differentiation by Income
Keep low-income earners in mind when designing a plan
P
lan sponsors' best strategies to
improve retirement outcomes for
low-income participants include
instituting automatic enrollment, offering
emergency savings options and implementing
financial wellness programs,
according to industry sources.
" Research has shown overwhelmingly
that the best way to get lower-income
workers to participate in a plan is to automatically
put them in the plan, " says Rich
Johnson, senior fellow and director of the
Program on Retirement Policy at the Urban
Institute, a Washington, D.C., think tank
for economic and social policy research.
At the same time, plan sponsors must
also consider the effect on low-income
workers if, for example, auto-enrollment is
paired with additional automatic features,
such as automatic escalation. Setting the
automatic deferral rate and subsequent
auto-escalation too high can be particularly
harmful to low-income workers, who
make their deferrals from lower earnings.
According to the Defined Contribution
Institutional Investment Association, low
income is $20,000 through $47,500 in
annual household income.
Another tactic employers can use to
help lower-income workers save is to defer
part of their pay raise automatically into
the retirement plan, rather than straight
36 PLANSPONSOR.COM February - March 2022 Art by Valeria Petrone
into their paycheck.
" Workers wouldn't necessarily feel like
they're losing out on something, because
they still get a slight bump up in their
salary, [while] getting a bump up in their
retirement savings, " Johnson explains.
Employers and their adviser often
adjust the plan's match rate to encourage
higher deferral rates. Industry research
shows that participants often defer up to
the maximum rate required to receive the
full match. The higher the level at which
the match ends, the more this can get
people to contribute, Johnson notes.
However, plan sponsors wanting to
increase low-income workers' retirement

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PLANSPONSOR - February - March 2022

Table of Contents for the Digital Edition of PLANSPONSOR - February - March 2022

INSIGHTS
INDUSTRY ANALYSIS
RULES & REGULATIONS
UPFRONT
Let’s Talk
Let It Grow
When Workers Retire in Stages
Virtual Lessons Learned
Managed Accounts, Today
How ‘Well’ Is ‘Well’ Enough?
Differentiation by Income
FIDUCIARY FORUM
INSIDE ANGLE
PLAN PROFILE
PLANSPONSOR - February - March 2022 - Cover1
PLANSPONSOR - February - March 2022 - Cover2
PLANSPONSOR - February - March 2022 - 1
PLANSPONSOR - February - March 2022 - INSIGHTS
PLANSPONSOR - February - March 2022 - 3
PLANSPONSOR - February - March 2022 - INDUSTRY ANALYSIS
PLANSPONSOR - February - March 2022 - 5
PLANSPONSOR - February - March 2022 - RULES & REGULATIONS
PLANSPONSOR - February - March 2022 - 7
PLANSPONSOR - February - March 2022 - 8
PLANSPONSOR - February - March 2022 - 9
PLANSPONSOR - February - March 2022 - UPFRONT
PLANSPONSOR - February - March 2022 - 11
PLANSPONSOR - February - March 2022 - 12
PLANSPONSOR - February - March 2022 - 13
PLANSPONSOR - February - March 2022 - 14
PLANSPONSOR - February - March 2022 - 15
PLANSPONSOR - February - March 2022 - 16
PLANSPONSOR - February - March 2022 - 17
PLANSPONSOR - February - March 2022 - Let’s Talk
PLANSPONSOR - February - March 2022 - 19
PLANSPONSOR - February - March 2022 - 20
PLANSPONSOR - February - March 2022 - 21
PLANSPONSOR - February - March 2022 - Let It Grow
PLANSPONSOR - February - March 2022 - 23
PLANSPONSOR - February - March 2022 - 24
PLANSPONSOR - February - March 2022 - 25
PLANSPONSOR - February - March 2022 - When Workers Retire in Stages
PLANSPONSOR - February - March 2022 - 27
PLANSPONSOR - February - March 2022 - 28
PLANSPONSOR - February - March 2022 - 29
PLANSPONSOR - February - March 2022 - Virtual Lessons Learned
PLANSPONSOR - February - March 2022 - 31
PLANSPONSOR - February - March 2022 - Managed Accounts, Today
PLANSPONSOR - February - March 2022 - 33
PLANSPONSOR - February - March 2022 - How ‘Well’ Is ‘Well’ Enough?
PLANSPONSOR - February - March 2022 - 35
PLANSPONSOR - February - March 2022 - Differentiation by Income
PLANSPONSOR - February - March 2022 - 37
PLANSPONSOR - February - March 2022 - FIDUCIARY FORUM
PLANSPONSOR - February - March 2022 - INSIDE ANGLE
PLANSPONSOR - February - March 2022 - PLAN PROFILE
PLANSPONSOR - February - March 2022 - Cover3
PLANSPONSOR - February - March 2022 - Cover4
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