Plan Sponsors Push Toward Retirement Income, Financial Wellness Over Last Decade

Plan sponsors have sought to broaden efforts to help their employees achieve retirement security by shifting plan designs and investment changes toward financial wellness and retirement income in the last decade, finds new J.P. Morgan Asset Management research.

Employers have experienced a growing sense of responsibility for employees’ financial wellness over the past decade, according to the J.P. Morgan Asset Management 2023 Defined Contribution Plan Sponsor Survey. The asset manager’s research team found that 85% of plan sponsors feel a strong sense of responsibility for employee financial wellness, up from 59% in 2013; meanwhile, 61% of respondents have used proactive plan design approaches to support achieving greater retirement security for participants.  

Employers have a sense of duty with regards to employees’ financial wellness that has continued to grow, with nearly nine out of 10 sponsors surveyed feeling a “very high” or “somewhat high” level of responsibility for their participants, up from 74% in 2019 and 59% 10 years ago, the survey finds.

The researchers note that plan sponsors have faced a host of challenges in recent years, including the COVID-19 pandemic, the Great Resignation, rising inflation, market volatility and passage of the SECURE 2.0 Act of 2022, that is adding administrative and regulatory factors. Even so, “plan sponsors appear to have emerged with an ever-expanding focus on how to help position participants for greater retirement funding success,” the researchers wrote.

Four out of 10 sponsors report offering their participants a financial wellness program beyond retirement and health benefits, and an additional three out of 10 are considering offering one, according to the research. One-quarter of plan sponsors offered student loan debt assistance, and 40% offered emergency savings benefits, one-on-one financial coaching and/or debt management assistance.

Proactive sponsors are defined as those that implement programs that make it easy to tap into the benefits of the plan, such as automatic enrollment and contribution escalation, personalized communications and investment defaults into target-date funds and other professionally managed asset allocation strategies, according to J.P. Morgan.

Key trends in the research showing more proactive movement toward investment menus and plan practices included:

• In 2023, 43% of plans offer automatic contribution escalation as compared to 21% in 2013. 
• The most frequently reported investment menu changes were adding “an option designed to generate income for retirees” at 45% and “reducing the number of investment options” at 35%.
• Three out of four surveyed sponsors reported feeling “extremely confident” or “very confident” that their participants have an appropriate asset allocation, led by proactive sponsors at 85% versus 59% for sponsors with a participant-driven philosophy.

The popularity of reenrollment, which is an annual or one-time event which reverts workers who opted out of a plan, has increased dramatically in recent years. Today, 55% of plan sponsors having considered reenrollment, and more than a quarter (26%) having already conducted or are planning to conduct a reenrollment in the next 18 months, up from 7% in 2019.

“Our enhanced 2023 Plan Sponsor survey highlights the industry shift as plan sponsors begin to recognize the interconnection of overall employee financial and personal wellness,” Alexandra Nobile, vice president, retirement insights, at J.P. Morgan Asset Management states in a press release with the research. “The implications of SECURE 2.0 serve to only accelerate this trend and we expect to see more plan sponsors taking a proactive approach to evolving their retirement benefit offering through innovative DC plan design.”

J.P. Morgan Asset Management partnered with Greenwald Research to conduct an online survey of 788 plan sponsors from January 9 through February 28, 2023. All respondents are key decision-makers for their organizations’ DC plans. All organizations represented have been in business for at least three years and offer a 401(k) or 403(b) plan to their U.S.-based employees.