Lowell says if a DC plan sponsor adopts a model for participants to use, it should roll out an educational program to help participants use the model in a way that is prudent and informed. Plan sponsors should explain the parameters of the model and what participants might think about when running those parameters. “Obviously plan sponsors have to limit how much to say to participants, but they can say participants may consider work stoppages they may have for personal reasons or changes in lifestyle that may cause them to change deferrals,” he says.
Carrington suggests other things plan sponsors can do to better position participants for success. They can target new hires—especially mid- and late-career hires—with communication that invites them to save at a rate similar to what they did at their prior job, not just at the new employer’s auto deferral percent. “They know they can save at a higher level because they did at their previous job,” he says.
Plan sponsors can also change their plans to accommodate regular withdrawals, not just lump-sums.
They can also choose models that help with Social Security claiming decisions, Carrington suggests, and provide education or access to advice that will help them fund retirement if they retire at age 65 but claim Social Security later.
Carrington believes the retirement readiness picture is more positive than what the data shows or what gets reported. “We look at general things, like average DC plan balance, and that’s very distorted. We don’t take into consideration things like savings from a participant’s whole job tenure or their household situation. Certainly there are things we can do to improve participants’ retirement readiness, but we don’t have to start from scratch. Incremental improvements will enhance retirement for many participants,” he concludes.