Kicking off the 2021 PLANSPONSOR virtual conference “What’s on the Minds of Plan Sponsors,” the keynote address, sponsored by Prudential, explored how the effects of COVID-19 call for a new, more robust approach to retirement plans.

“I speak with plan sponsors on a daily basis and learn what is top of mind,” said Michael Knowling, head of client relations and business development at Prudential Retirement.

“The widespread demonstrations over social and political unrest and the election cycle unlike any we have experienced, without any doubt, have contributed to the level of stress we were already experiencing due to the pandemic,” Knowling said. “The global pandemic has threatened lives, businesses and the economy and will forever change the way we live and work.”

As a result of the pandemic, there was a 203% spike in unemployment claims in March and April, with 4.5 million people out of work, and millions of Americans are still unemployed, Knowling said.

Even before the pandemic, 28% of Americans had no emergency savings, and 61% of those with emergency savings said they would run out of funds. “Debt’s impact is still being felt,” he said.

In the fall, Prudential surveyed plan sponsors and learned that these factors have led to new trends among employers, Knowling noted.

“Employers now see it as their responsibility to care for workers’ total wellness,” he said. “They have a variety of challenges, including communication, primarily due to virtual work. Mental health is the top challenge employers plan to face in the next 12 months, followed by child care/caregiving, and helping manage finances, and organizations anticipate increased engagement with benefits and financial wellness resources and the need to do more.”

In the face of all of these new goals, benefits funding will be flat in 2021, which means decisionmakers need to be more resourceful, he said. Specifically, they will need to address debt, the lack of emergency savings, helping caregivers and managing day-to-day finances with budgeting tools, he said.

Knowling pointed out 11 challenges that employers think their employees are now facing: mental and emotional stress (cited by 80% of employers), lack of emergency savings (72%), difficulty balancing work and child care (68%), loss of household income (66%), managing day-to-day expenses (66%), balancing work and elder care (64%), routine medical care (63%), high levels of debt (63%), an inability to access affordable lending options (58%), insufficient benefits (53%) and a lack of transportation to and from work (50%).

Suzanne Schmitt, vice president of financial wellness at Prudential Financial, added that a survey Prudential conducted found that 89% of employers now view addressing COVID-19-related issues as their responsibility, and 75% are planning to enhance their plan design as a result. Specifically, Schmitt said, they are going to address debt, emergency savings and caregiving this coming year.

Schmitt said there are multiple benefits to workers and employers when they address these challenges. When given student loan assistance, participation in the 401(k) plan increases by 7% and engagement with digital tools rises by 8%. Participants increase their 401(k) contributions by 13%, and 28% more workers are likely to remain at their employer, she said.

When workers get credit and debt counseling, 14% are able to reduce their monthly spending and they typically see a 50-point increase in their credit score, she said.

When emergency savings is addressed, workers increase their contribution to their retirement plan by 4.5%.

It is important to help people with caregiving, because 67% of caregivers miss work or take unpaid leave, Schmitt said. Twenty-eight percent of caregivers stop saving, 23% have taken on debt, and one in four women are thinking about leaving the workplace or downshifting their careers because they are caregivers.

Marc Howell, vice president of custom retirement solutions at Prudential Retirement, said employers can be creative about shifting their benefits to address these concerns without raising their costs. One client, with an 80% participation rate in its retirement plan even with automatic enrollment, decided to reduce its match and redirect the funds to create an emergency savings fund that it called a lifestyle account. That resulted in both high participation in this account and a boost in its retirement plan participation—“and it has become a recruitment tool,” Howell said.

Another company was hiring a lot of people right out of college or graduate school and discovered they were carrying large amounts of student debt, so it changed the match in its 401(k) for those younger than 35 so that they could redirect it to student loan repayment, Howell said. “They simply took low-impact money and gave it back to employees in a high-impact manner,” he said.

A third client decided to reduce its 401(k) match and repackage it as a retention bonus. “This solves for broad-based recruitment and retention,” Howell said. “This is helpful for industries concerned about burnout.”

In conclusion, he said, there are three key components to develop a stronger benefits plan. First, optimize plan design, even if it means being creative. Second, offer holistic financial wellness that addresses such concerns as stress, caregiving, emergency savings and debt. Third, he said, it is time for employers to think about offering predictable income for those who retire from its plan with guaranteed lifetime income options.