Data and Research November 24, 2015

Mobile Offerings for Retirement Plan Participants Increasing

In the past year, more retirement plan providers have launched new mobile applications or enhanced their existing mobile platforms.
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Retirement plan providers continue to place more emphasis on their mobile presence, according to Corporate Insight’s latest Retirement Plan Monitor report update.

In the past year, providers have launched new phone apps, tablet apps and revamped mobile sites. Only MassMutual introduced a mobile app while three firms unveiled tablet apps: The Principal Financial Group, T. Rowe Price and TIAA-CREF. The tablet apps all mirror the firms’ existing mobile platforms, offering participants a consistent cross-platform experience.

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The Principal and T. Rowe Price introduced new responsive participant sites, thus revamping the mobile browser experience. The new responsive designs not only provide a uniform experience from desktop to mobile but also offer sleeker interfaces and improved organization and navigation.

Most firms with existing mobile platforms enhanced their offerings, including the addition of transactions and tools. Charles Schwab and Transamerica both added transactions for the first time to their mobile platforms – bringing the total amount of firms that offer mobile transactions up to 11 out of 18 – and four expanded their existing capabilities. This time last year, four of 17 firms offered transaction capabilities.

Fidelity, The Principal, Transamerica and Voya Financial added mobile-friendly retirement tools, allowing participants to assess their retirement readiness. Three of the tools allow participants to conduct transactions directly from the results interface. The addition of tools and transactions increases participant engagement and encourages beneficial account changes, Corporate Insight says.

Additional features, such as message centers and document sending capabilities, are slowly appearing on mobile platforms. Sending documents, a feature added by one firm, allows participants to use a phone’s or a tablet’s camera to upload documents, similar to depositing a check on a mobile banking app.

Corporate Insight suggests that going forward, firms should continue to add transactions, tools and features such as the document upload to the mobile experience and continue to incorporate responsive design, considering the increased dependence on phones and tablets over traditional desktop computers.

Looking at actual 401(k), 403(b) and 457 accounts, Retirement Plan Monitor explores the plan participant experience offered by leading defined contribution plan providers. The research analyzes the online and offline user experience, with a focus on website design and usability, online education tools, transaction capabilities, participant account documents, plan fees and more.

Participants November 24, 2015

DC Participant Loan Takers Go On to Save Less

Fidelity finds borrowers tend to save less on average over time after their first loan.
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Earlier this year Fidelity reviewed loan and withdrawal activity among 21,200 retirement plans and 13.5 million participants, finding loans are often viewed as an unavoidable financial necessity for those taking them.

Despite the perceived necessity, retirement savers almost never see a long-term improvement in the financial situation by choosing a loan or even a hardship withdrawal, Fidelity says.

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Overall about one in 10 plan participants elected to take a loan last year, the research shows, with an average amount around $10,000. Hardship withdrawals occur even less frequently—drawn by about 2.2% of participants during the year-long sample period. Most often participants taking a hardship withdrawal cited medical expenses (19%) or the need to avoid foreclosure on a home (34%).

Part of what makes taking loans harmful for the long-term is that those who take one loan are likely to take at least one more in the future. While 50% of 401(k) borrowers take just one loan, the other 50% borrow multiple times, Fidelity says, and 10% go on to take a hardship withdrawal.

The reporting echoes earlier research, published by the National Bureau for Economic Research (NBER), which suggests when a plan sponsor permits multiple rather than only one loan, each individual loan tends to be smaller, but the probability of plan borrowing nearly doubles, and the aggregate amount borrowed rises by 16%. The researchers contend that this suggests employees perceive that easier loan access is actually an encouragement to borrow.

Perhaps unsurprising, Fidelity finds borrowers tend to save less on average over time after their first loan. For example, fully one in four borrowers reduced their savings rate within five years of taking a loan, generating $180 to $690 less per month in anticipated annuitized retirement income. Even more troubling, Fidelity concludes, 15% of those who take a loan go on to stop saving altogether within a fairly short period of time. 

These findings and others are presented in a helpful infographic here.

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