Employers Prioritizing Diversity and Financial Wellness Changes

Plan sponsors say they will concentrate on diversity, equity and inclusion improvements in their retirement plans in 2022 and examine how participants are using benefits.

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.   

Get more!  Sign up for PLANSPONSOR newsletters.

“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.

Second Struggling Union Pension Wins PBGC Financial Support

Alongside confirming that the payment has now gone out to Local 138, PBGC this week announced it has approved a second application for emergency pension funding.

Signed into law last March, the American Rescue Plan Act (ARPA) included $1.9 trillion in collective economic relief, much of it targeted to address the coronavirus pandemic.

Along with other provisions aimed at supporting the retirement planning sector, the law allowed for substantial relief payments to be targeted at stressed multiemployer pension plans sponsored by unions. Specifically, the law allows multiemployer plans that are in “critical and declining” status, as defined by prior legislation, to get a lump sum of money to make benefit payments for the next 30 years, or through 2051.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

In December, the first of these payments was approved by the Pension Benefit Guaranty Corporation (PBGC), going to the Local 138 Pension Plan based in Baldwin, New York, which covers 1,723 participants working in transportation. The pension plan just this week received its $112.6 million in special financial assistance (SFA).

Alongside confirming that the payment has now gone out to Local 138, PBGC this week announced it has approved a second application for emergency pension funding, this one coming from the Bricklayers and Allied Craftworkers Local 5 New York Retirement Fund Pension Plan (Bricklayers Local 5 Plan).

The Bricklayers Local 5 Plan based in Newburgh, New York—which covers 821 participants in the construction industry—will receive approximately $61.8 million in SFA, including interest to the expected date of payment to the plan.

The plan was projected to run out of money in 2022, and without the special financial assistance program, the Bricklayers Local 5 Plan would have been required to reduce participants’ benefits to the PBGC guarantee levels upon plan insolvency, which is roughly 20% below the benefits payable under the terms of the plan. PBGC says the special support payment will enable the plan to continue to pay retirees’ benefits without reduction for many years into the future.

“These 821 bricklayers went to work with the promise of a pension when they retired. Today, the Biden-Harris Administration has fulfilled that promise,” says U.S. Secretary of Labor Marty Walsh, chair of the PBGC Board of Directors.

«