PLANSPONSOR - June - July 2022 - 33

BEST PRACTICES | PLAN DESIGN
survey, 60% cited the retirement benefit
as an important reason they stay with their
current employer, compared with 41% in
2010. Further, 59% said they would be
willing to have more deducted from their
paycheck in order to have a more generous
retirement benefit, up from 54% in 2020.
" There's a strong sentiment across
the board from employees that they want
their employer to provide them with a
solid financial foundation, " says Monica
Martin, senior director, integrated and
global solutions, total rewards leader at
WTW in Atlanta. " The data show a flight
to security among employees. When
employees are making a decision about
whether to stay at an organization or join
a new one, having a strong pay and benefits
package is a differentiator. "
Driving Change
As so many employees have indicated
their willingness to change jobs, companies
have started to take a closer look
at
retirement offerings, and to make
adjustments. According to WTW's 2022:
The Next Evolution of DC Plans Survey,
United States, a vast majority of the 363
plan sponsor respondents-in industries
ranging from manufacturing to public
sector and education-are looking for
ways to enhance their retirement plans
to attract and retain talent. Seventy-five
percent said they made a change to their
plan in the past two years and predict
they will make at least one more over the
next two years.
These changes can take many
forms such as offering a financial wellness
program, increasing the employer
match on retirement contributions, or
expanding how such contributions may
be used to include paying off student
loans or other types of debt, sources say.
" There's more creativity happening
at the plan sponsor level, " says Martin.
" Companies have recognized that not
everyone can afford to save right away,
so we're seeing an increase in outright
contribution, not just matching. We also
see program design focused on financial
" There's a strong sentiment
across the board from employees
that they want their employer
to provide them with a solid
financial foundation. "
resiliency so employees can weather financial
shock while still saving for the future. "
Christopher Magno,
senior vice
president and general manager of ADP's
retirement services division in New York
City, agrees. " When it comes to employer
matching, the most common formula we
see is 50 cents on the dollar up to 6% of
compensation. To the extent that you can
go north of that, you're going to have a
much more attractive offer, " he says. " We
have also seen more aggressive vesting
periods. Historically, you might see
vesting after, say, six years. If you can do
it in one or two years or immediately, that
can be a selling point today. "
The Rise of Wellness
Financial wellness programs
are
also
growing in popularity, sources note.
Such programs include the retirement
plan but place it within a broader context,
which also may include such features
as an emergency fund, savings account,
student loan payoff assistance, or tuition
reimbursement. Some of the more
progressive plan designs include support
for in-retirement decumulation planning,
too. Managed accounts have also come
alongside financial wellness programs, as
plan sponsors look for account structures
that offer greater flexibility and customization
options for employees.
" There's a bigger focus on having a
personalized financial plan, " Magno says.
" These programs can give employees
financial literacy education and support
but can also put them in touch with professional
advisers who can help them plan
out what they need to save. The advice can
also help them understand factors such
as expected Social Security contributions
and when to retire to maximize their
benefits-information they can actually
use-more so than just offering general
details and leaving them to draw their
own conclusions. "
As WTW's Martin sees it, the conversation
about financial wellness is really
about nurturing participants' resiliency
throughout their career. The next evolution
of wellness programs is likely to be
more flexible both in design and how
benefits are used, she says.
" What we're seeing is that the
purpose of the retirement plan as part
of the value proposition to employees
is beginning to evolve. " The industry is
modernizing not only employees' perception
of their retirement plan, but of how
the plan can connect to, and benefit,
various parts of their life, she says.
" We're also removing some of the
abruptness, " Martin says. A personalized
plan can put employees on more of a path
to retirement, rather than just leaving
them to pick a day in the future without
much notice, she explains.
" It's not just employees that get the
benefit of financial planning with these
programs-employers do as well, " she
says. " We're seeing more employers
look at flexible work arrangements for
older employees so these individuals can
phase into retirement. The organization
can then use that period to train replacements
and engage in knowledge-sharing.
This flexibility is also helpful to older
employees who may be re-entering the
workforce. There's a lot of value in not
having a hard line between working and
retirement. " -Bailey McCann
PLANSPONSOR.COM June - July 2022 33
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