Employers Prioritizing Diversity and Financial Wellness Changes

Plan sponsors are focusing on including more diversity, equity and inclusion (DE&I) initiatives to improve retirement and financial well-being programs for participants in the coming year, according to a new report by Alight Solutions.

Researcher Rob Austin, vice president and head of research at Alight, examined the changes defined contribution (DC) plan sponsors intend to make to their retirement plans and financial well-being programs in 2022 in Alight’s annual survey, titled “Hot Topics in Retirement and Financial Wellbeing.” His report found that employers will focus on making gradual changes, including enhancing the retirement plan with additional financial well-being programs, and examining how often these benefits are used or supplementing plans with assistance in other financial areas.   

“We have reached a pivotal moment with financial well-being programs,” the report states. “Just a few years ago, it was common to have only about 25% of employers offer tools, services and educational campaigns on topics related to financial well-being.”

Alight found that 53% of employers report the importance of financial wellness programs has increased, while only 1% say that it has decreased.

Among plan sponsors, 71% reported providing tools to educate participants on the basics of financial markets and simple investing, compared with 46% in 2018.

Additionally, 94% employers are very likely or moderately likely to provide workers with resources to help them improve their financial well-being beyond retirement, and 85% of plan sponsors are evaluating financial well-being programs by examining how participants use those benefits. The report also shows an increase in the percentage of employers providing specific tools to help participants with budgeting, with 59% giving access to such tools compared with 35% in 2018; debt management (51% vs. 27% in 2018); and financial planning (52% vs. 28% in 2018).

Employers will also focus on enhancing their diversity, equity and inclusion efforts for retirement and financial wellness plans for the next year, the report found.

More than 80% of employers say they aim to focus on expanding inclusion and diversity efforts, with 39% very likely and 43% moderately likely. One in seven plan sponsor respondents reported that the plan measures and analyzes retirement plan behavior by race and ethnicity, and almost half of employers reported recently evaluating plan communications with a specific focus on diversity. Among the remaining group, 62% said they’re very likely to do such evaluations in 2022.

“When it comes to overall priorities, employers are more likely to concentrate on activities that have a more immediate impact on their workforce,” the report states. “Topics like expanding financial well-being programs and focusing on the diversity and inclusion aspects of their plans ranked much higher than issues such as evaluating phased retirement initiatives or adding decumulation tools.”

While 82% of plan sponsors intend to expand inclusion and diversity efforts in retirement plans, just 28% reported the plan will concentrate on measuring or projecting the expected retirement income adequacy of employees in the plan, and 7% will enhance the retirement program to focus on the asset decumulation stage for participants.

DE&I has become a bigger priority for plan sponsors, Willis Towers Watson says. The firm is examining how plan sponsors can achieve greater equity and inclusion in retirement plan designs to address savings gap among plan participants.  

“Our 2020 DC survey asked employers if they have reviewed their plan to consider DE&I and the relation between participant behavior and plan design,” says Kezia Charles, director of retirement at Willis Towers Watson. Plan sponsors are tackling the question by beginning to do more data analysis and breaking down data by gender, race, age and income. Plan sponsors use the mined information to examine differences in participation rates, loans and withdrawal uses, she explains.  

Kezia adds that plan sponsors can address some equity issues by making plan design changes.

Figures from an Economic Policy Institute (EPI) analysis of 2016 Consumer Finance data show that retirement savings are not evenly distributed across demographics or income. EPI found that high-income families are seven times more likely to have retirement account savings than low-income families.

The share of Hispanic families with savings in retirement accounts declined in the wake of the Great Recession, from 38% in 2007 to 35% in 2016, while the share of Black families with retirement savings declined from 47% to 41%, according to the EPI data. Comparatively, two-thirds (68%) of white non-Hispanic families had retirement savings in 2016, up from 67% in 2007.

The entire Alight report can be viewed here.