Plan Sponsors With 401(k) Advisement May See Higher Worker Participation

401(k) retirement plan sponsors who work with a plan adviser are likely to see better outcomes in employee participation than those without an adviser, according to research released Tuesday from Morgan Stanley at Work.

Of plan sponsors who reported full employee retirement plan participation, 80% work with an adviser, according to research from the investment firm’s retirement and financial wellness division. Of those companies with less than 25% eligible employees participating in their 401(k) offering, only 62% reported working with an adviser.

“The dynamics of today’s economy have changed, with employers and employees alike juggling numerous competing financial needs,” Anthony Bunnell, Head of Retirement for Morgan Stanley at Work, said in a release. “It’s not surprising that plans with financial advisers are associated with more engaged employees, as a financial adviser can play a central role not just in managing the plan, but in helping employees navigate the markets and invest in their future.”

The most common reason plan sponsors said employees don’t choose to participate in their workplace 401(k) is that they want their full paycheck immediately (62%). The other reasoning is that they have other types of investment accounts (22%), or that they don’t see the value of a 401(k) plan (15%).

Among the 710 plan sponsors surveyed, their leading concerns about managing their 401(k) benefit package were fiduciary responsibility (26%), employee education (24%), and compliance and regulations (23%).

The majority of plan sponsors (62%) say they pay attention to legislative changes to retirement plans—though only 33% are receiving information about this area from their advisers. Meanwhile, 31% say they are not monitoring the regulatory space, and 7% saying they are sometimes monitoring it.

Another top concern for plan sponsors is protecting participant data, cited by 20% of those surveyed. Sixty-three percent of plan sponsors said they regularly review participant data with their retirement plan adviser, followed by 30% sometimes reviewing it, and 7% not reviewing it at all.

Within focus groups, researchers found that plan sponsors assume participant data security and monitoring is included in their plan.

“As legislation focuses more on participant data, working with plan sponsors to understand their requirements in this area will be key,” the researchers said.

When it comes to the education content being provided to participants, the majority (87%) said the content is engaging. When asked how to make it even more engaging, plan sponsors pointed to more topics related to individual financial stages (44%), content with digital tools (39%), and topics specific to life events (36%).

Overall, the 401(k) benefit continues to matter in the struggle to keep and draw talent. A whopping 81% of plan sponsors reported an average to above-average rate of employee turnover at their companies, with about half saying their 401(k) benefit is effective in retaining and recruiting talent, and about 38% saying it is somewhat effective.

The Morgan Stanley at Work report was based on research and survey data from plan sponsors ranging from 20 to 3,000 employees. It was conducted by Rebel & Co. in the third quarter of 2022.