Data and Research January 13, 2016

Plan Sponsors Value Employee Education by Advisers

Retirement plan sponsors that work with an adviser are more engaged and are more likely to think their employees are saving enough for retirement, a survey finds.
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Employee education and advice from plan advisers is universally valued by plan sponsors, according to a MassMutual survey.

Explaining the retirement plan benefits and options available to employees is a preferred topic for plan adviser education by 87% of plan sponsors that work with an adviser and 80% of those that do not. Seventy-three percent of both groups want advisers to educate employees about the importance of contributing to the retirement plan.

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Three-quarters (76%) of plan sponsors that work with advisers want personalized advice for employees to determine whether they are on track for a successful retirements, as do two-thirds of those that do not work with and adviser. Specific help with employees who are approaching retirement is desired by 65% of sponsors that work with an adviser and 53% of those that do not.

However, advisers say they need better cooperation from plan sponsors in order to provide education and advice to participants. Advisers find it difficult to motivate sponsors to schedule a time where they can come in and conduct group or one-on-one meetings. Advisers also would like help from the plan provider with educating participants about their plan.

The MassMutual Winning Combination Study polled 565 employers that sponsor retirement plans, including 449 that worked with an adviser and 116 that did not, with retirement plan recordkeeping assets from less than $1 million to as much as $75 million.

NEXT: Sponsors who work with advisers find them valuable

Overall, retirement plan sponsors say they prefer to work with a plan adviser who emphasizes employee education, good customer service and reducing plan costs, the survey found.

Sponsors who work with an adviser find them highly valuable. They primarily chose to work with an adviser for help with plan design and features, with fiduciary obligations and investment selection a close second and third. Plan sponsors that work with an adviser are more engaged and are more likely to think their employees are saving enough for retirement. They report doing more to encourage participation in their plan and to promote employees’ overall financial wellness.

The survey found plan sponsors working with an adviser review their plan more often. Half review their plan more than once per year.  But, while these plan sponsors are satisfied with and highly value adviser plan reviews, they prefer to review with their adviser more regularly than they are currently.

One-third of those not working with an adviser are likely to do so in the future, and among those with plan assets of $25 to $75 million, six in ten say they are likely to engage an adviser in the future.

More information from the study is here. 

NEXT: Right measures could improve education

Leaning too heavily on participation statistics alone may mask a sub-optimal education program, MassMutual suggests. E. Thomas Foster, a spokesman for MassMutual’s retirement services division, speaking at a presentation by MassMutual, said, “When I talk to plan sponsors, I ask a few simple, probing questions,” he said, noting that size of plan is of little importance. At a session with plan sponsors ranging from Apple and Williams-Sonoma to smaller business owners, Foster says the same question resonated with all plan sponsors.

“How many of you can say succinctly what percentage of your participants are ready to retire right now with 75% to 80% of income at age 67?” he recalled. The answer might be surprising. Very few were able to quantify how plan participation actually ties into outcomes, and Foster pointed to education as the solution—or perhaps the problem.

“You might think you have a good education program, but if you can’t answer that, your education might not be as good as you think,” Foster said. Plan sponsors need a process that can lead them through the metrics and analysis to see where on the readiness scale their employees are.

Participation doesn’t tell the whole story, agreed Elaine Sarsynski, executive vice president of MassMutual retirement and Worksite insurance. Plan sponsors may have a 95% plan participation rate, but “employees may not be investing enough, they may not be invested properly, and it can create real issues.” Getting to the real statistics is critical, Sarsynski said.

According to Foster, the retirement industry may be too hung up participation while outcomes go under the radar. “You can have 100% participation in the plan, but if you don’t have the right outcomes, that is an exercise in futility,” he said. The key is to have the right way to measure for employees how much they will be able to receive in retirement for the rest of their lives, and it is critical to ask the right questions.
Data and Research January 13, 2016

Retirement Plan Access Differs by Demographics

Access to employer-based retirement plans differs widely across states, an analysis finds.
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Wide differences in access to and participation in employer-based retirement plans exist across states, with variations by employer size and industry type as well as by workers’ income, age, education, race and ethnicity, according to a report released by The Pew Charitable Trusts.

The report, “Who’s In, Who’s Out: A Look at Access to Employer-Based Retirement Plans and Participation in the States,” found that 61% of workers in Wisconsin participate in an employer-based pension or retirement savings plan, compared with 38% in Florida. Access and participation is higher in the Midwest, New England, and parts of the Pacific Northwest—and lower in the South and West.

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The report also finds that among Hispanic workers, access to a plan is around 25 percentage points below that for white non-Hispanic workers (38% vs. 63%, respectively). Black and Asian workers also report lower rates of access than white workers.    

John Scott, director of Pew’s retirement savings project, notes that half of the states are looking at their own solutions. See “Will State-Run Plans Help Close the Coverage Gap?”   

Overall, Pew’s analysis, based on a pooled version of the Census Bureau’s Current Population Survey (CPS), found that 58% of private sector workers have access to a plan, while 49% participate in one. Pew also found that more than 30 million full-time, full-year, private sector workers ages 18 to 64 lack access to an employer-based retirement plan, whether a traditional pension or a defined contribution plan such as a 401(k).

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