Rising Above

Plan sponsors are increasingly interested in financial wellness and confident that employees will meet retirement goals

Our most loyal readers will know that every year since 1996, PLANSPONSOR has conducted an extensive industry survey among defined contribution (DC) plan sponsors across the country. The survey has become a definitive source by which plan sponsors gauge what their peers are doing with their plans. Over the course of 23 years, we have measured and tracked such areas as plan participation and eligibility, design features, fees, oversight and providers. Many of these elements have evolved, their significance growing or lessening over time; sometimes changes occur from one year to the next as new initiatives are tested.

The findings of the 2018 PLANSPONSOR Defined Contribution (DC) Survey: Plan Benchmarking show improved use of plan design. Roth provisions are on the rise, effective match levels are similar to what they have been, fees seem to be trending downward slowly, automatic features are somewhat more prevalent, and overall participation rates are ticking up. Whether alone, or through partnership with recordkeeping plan providers and/or advisers and consultants, plan sponsors are working to make sure their employees take advantage of all of the features a defined contribution plan has to offer, and it appears those employees are benefitting.

Most years, the survey results indicate few surprises, but this year a couple of data points are worth noting.

For the past several surveys, toward the end of the exhaustive questionnaire, we have asked plan sponsors whether their organization has a “responsibility to improve employee financial wellness.” Typically, about 50% of respondents have had a neutral response to this statement, another 25% have agreed and 25% disagreed. This year, there was a noticeable shift—just 2% of plan sponsors disagreed; in the large and mega plan market segments, less than 1%—virtually no one—disagreed.

In other words, plan sponsors overwhelmingly believe their organizations have some responsibility for employee financial wellness. It is interesting to note these findings, when the industry has yet to settle on a consensus definition of financial wellness and many plan sponsors say they offer no financial wellness education to their participants.

In a similarly structured question, we asked plan sponsors to indicate their level of agreement with the following statement: “Most of our employees will reach their retirement goals by age 65.” Again, respondents have typically remained neutral, with about two-thirds neither agreeing nor disagreeing and just 15% to 17% taking a definitive position either way. This year saw the level of agreement move up to 22%, with just 13% disagreeing.

So why, in just a year, have plan sponsors suddenly begun to feel such a responsibility for employee financial wellness? Have plan fiduciaries become more paternalistic, or has the industry done an amazing job of peddling financial wellness programs? And why are these sponsors more confident their employees are reaching their retirement goals? Is it because equity markets have been kind to many defined contribution plan balances, therefore lifting sentiments overall? Or are the financial wellness programs really working? Will these feelings change if this longstanding bull market reverses, as many financial professionals say is inevitable? It’s hard to pinpoint an answer at this time, but we intend to keep trying to find out. —Quinn Keeler