Administration September 24, 2020

PSNC 2020: Recalibrating Retirement Plans

The COVID-19 pandemic has accelerated what was already an emerging goal for the retirement planning industry: helping participants prepare for short-term financial challenges as a means to create greater long-term wealth.

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The fourth day of the 2020 PLANSPONSOR National Conference included an engaging presentation about how to “recalibrate retirement plans” to address the present moment and the foreseeable future.

Naturally, a big part of the conversation, which featured several experts from Prudential, as well as Bruce Lanser, a financial adviser and institutional retirement plan consultant with UBS, focused on the impacts of the coronavirus pandemic on U.S. workers. The speakers recounted the massive numbers of job losses and the collateral effects that have been felt by those who have been lucky enough to maintain employment, such as the significant stock market volatility causing greater uncertainty about retirement.

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Michael Domingos, head of sales and strategic relationships, Prudential Retirement, said the present moment has put an emphasis on three key concepts that, while more important today, are not totally new in the retirement planning space.

“The first is simply the importance of foundational financial wellness as a precursor to retirement security,” Domingos said. “We have learned just how challenging it is for a lot of people to meet unexpected expenses while also meeting their debt obligations and living expenses. This has demonstrated the need for employers to embrace financial wellness programs and to implement things like emergency savings accounts and support for student loan debt repayment.”

The second lesson that has emerged, which again was already known but has only become more important, is that plan design matters.

“The data shows so clearly that we can improve plans and directly improve people’s financial lives through better design decisions,” Domingos said, highlighting the importance of automatic enrollment and the provision of default diversified asset-allocation solutions.

The final focal point, in Domingos’ view, is the growing importance of guaranteed income. He noted that near-retirees commonly remain over-exposed to equity market risks, and that many could benefit from considering purchasing income guarantees.

Also included in the presentation was Brian Coleman, vice president of total rewards at Dawn Foods, which earned recognition as a 2016 PLANSPONSOR Plan Sponsor of the Year. Coleman discussed some of the progressive plan design elements the firm has deployed in recent years, noting that these elements have helped the plan population navigate some of the challenges of the COVID-19 pandemic. In addition to highlighting the firm’s emergency savings accounts, he said offering the Prudential Pathways series of financial wellness seminars has been helpful for employees. The 90-minute education sessions, which take place during the work day, cover such topics as living within a budget and mapping out a retirement income strategy.

Asked about Dawn Food’s decision to default participants 55 and older into the Prudential IncomeFlex product, Coleman said many team members have expressed their nervousness about selecting 401(k) investment options and trusting those products with all their savings after the retirement date.

“Our team members do not always have the skill set to invest confidently,” he said. “We wanted to give them another option for their retirement wealth. For those team members uncomfortable with planning their future, they can have something that guarantees them a stream of income for their lifetime.”

Currently, upward of 35% of plan assets for participants 55 and older are in IncomeFlex, he said.

In terms of how to educate participants about a retirement-income option, Coleman said the most important elements are simplicity and transparency—though it is of course not always easy to balance these two elements in practice.

“Focus on explaining as simply as you can what the program is, what the positives and negatives are,” Coleman said. “The key for income products is to point out that they do exist and can be utilized effectively by the average person.”

Benefits September 24, 2020

PSNC 2020: Promoting Lifelong Financial Wellness for Employees

The keys are tailoring it for people as they age, making it actionable and providing one-on-one access to a financial adviser.

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At the virtual session “Promoting Lifelong Financial Wellness for Employees” at the 2020 PLANSPONSOR National Conference, speakers discussed how they use plan demographics and knowledge about the composition of their workforce to decide what kinds of financial education to offer.

Sixty percent of VSP Global’s workforce is female, so many of the financial wellness programs it offers are tailored to them, said April Bettencourt, senior director, global employee benefits at the company.

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“We have five lines of business, including laboratories where employees don’t have access to computers,” so VSP makes its digital programs available on cellphones and tablets, Bettencourt said. VSP also sends annual retirement readiness mailers to employees’ homes with specific messages according to age, she said.

Through surveys, VSP has also been able to find out what its employees are interested in learning about, and at the top of that list are budgeting and debt management, Bettencourt said, adding that all employees are given access to certified financial planners (CFPs).

“We also look at how retirement ready they are,” Bettencourt said. “This is how we slice and dice our data.”

The first thing UBS does when it starts working with its plan sponsor clients is to help them promote their financial wellness programs to their workers, said Sudhir Tauro, executive director, UBS Workplace Wealth Services. “Only 40% of employees are aware of their company’s wellness program, and, of them, 67% participate,” Tauro said.

The people who are the most likely to participate are men, younger employees and those with the most assets, Tauro said. To compensate for the low participation rates among women, UBS provides its plan sponsor clients with communications to target them, he said.

It is important to offer programs that will resonate with various age groups, he said. Those in their 20s are typically most interested in managing credit card debt and building up emergency savings, Tauro said. Those in their 30s and 40s are often concerned with saving up money to buy a home, taking care of elderly parents and building up adequate retirement savings, he continued.

“Older employees nearing retirement focus almost exclusively on retirement, longevity and having the funds to leave a legacy,” Tauro said. “By understanding these various needs by age, we can tailor our financial wellness program to make it relevant and actionable.”

Kelli Send, principal, founding member, Francis Investment Counsel LLC, said that beyond looking at the demographic data, it is very helpful to survey workers to find out what they want to learn about.

It is also critical for plan sponsors to offer one-on-one financial planning advice sessions to participants and for the sponsor to assume that cost, Send said. “At the end of the day, what matters is getting one-on-one advice from a financial planner who can met the participant where they are at in their financial journey, be it early, mid- or late career,” Send said.

Francis Investment Counsel creates unique financial wellness programs for each of its plan sponsor clients, Send said, taking into consideration the operational concerns of each workforce. For instance, employees may work in a manufacturing plant and not have access to a computer, or they may be shift workers, or perhaps not tech savvy, she said.

Financial wellness programs should take a multi-channel approach, because different age groups prefer to be reached through different formats, such as on-site group meetings and online video, she said.

Send agreed with Bettencourt that successful financial wellness programs need to include access to an adviser. “You need to follow up with money advice, not so much from a call center, but we feel very strongly it is the relationship between the participant and the adviser that will enable a person to make true financial progress.”

Francis Investment Counsel has “had great success in gamifying and using polling in our classes to drive engagement,” Send said. It also helps to drive participation if workers hear testimonials from peers who have participated in the financial wellness program, she added.

“Lastly, and this is super important, embed the ability to track change, to create a before and after picture you can show to the people making the decision to fund the program, to see that it is actually making a difference for people,” Send said.

Sudhir said UBS has learned through surveys that participants want a financial wellness program that touches on many different topics. “Ninety percent felt good about their experience when there were six or more features,” he said. “They are not looking to solve just one problem, and when they are offered these resources, they are more satisfied with their employer.”

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