Are You Listening?

Now in its 9th year, the PLANSPONSOR Participant Survey tracks the behaviors, decisions and preferences of DC plan participants.

Against a backdrop of rising inflation and global instability, many employees are feeling the pressure of meeting their day-to-day financial needs. That sentiment was evident in the 2022 PLANSPONSOR Participant Survey. This year, 2,301 American workers responded to questions about their financial behaviors, preferences and attitudes; of this group, 774 full- or part-time employees were counted for being active participants in an employer-sponsored defined contribution plan.  

This is the survey’s ninth year, and over this time, the workers’ evolving attitudes have been setting a trajectory for participants’ choices today—what is driving workers’ decisions about retirement and the plan, and how can sponsors predict these decisions as much as possible, then proactively steer a worker’s course toward retirement readiness? 

More than 45% of the survey respondents have been with their employer for seven years-plus, and more than 53% work for employers with over 500 employees. Forty-six percent said their employer offers a financial literacy/wellness program, while 13% do not know whether their employer offers this option.  

Krystal Baker Buissereth, a chartered financial analyst and head of financial wellness at Morgan Stanley in New York City, says, as more employees worry about their current ability to make ends meet, and their future comfort in retirement, they are looking to their employer for help. Many companies recognize their employees are in need and are implementing new wellness programming in response, Buissereth says. All generations in today’s workforce can use extra support, she notes. 

Consider that 43% of survey respondents defined their current household financial situation as living paycheck to paycheck, and just one-third (32%) can cover a one-time, unexpected $500 expense.

Findings gave plan sponsors a few affirmations for their efforts, though, including proof that financial wellness programs work. Ninety-six percent of respondents found their employer’s financial literacy or wellness program to be somewhat, very or extremely helpful in improving their financial status and/or reducing financial stress.

Of respondents with a financial wellness program at work, 55% reviewed digital/online content, 30% attended employer-hosted training seminars, 18% received one-on-one guidance from an employer-provided financial expert, and 21% did not participate. 

The Employee Benefit Research Institute issue brief “Field of Dreams? Measuring the Impact of Financial Wellbeing Initiatives on 401(k) Plan Utilization” examines the extent to which attendance at financial wellness webinars affected 401(k) plan participant behaviors. According to EBRI’s calculations, participants’ estimated increase in 401(k) contributions after attending any financial well-being webinar was between $649 and $988, depending on age and initial contribution level. Use of a budgeting webinar positively correlated with increased employee 401(k) contributions in all cohorts.

Fifty-one percent of survey respondent’s current contribution/deferral rate is under 5%, and only 14% defer 10% or more. Thirty-eight percent of respondents were defaulted into their current deferral rate, and 28% said they wanted to receive the maximum employer match so set their deferral rate accordingly.  

Amber Brestowski, principal and head of advice and client experience for Vanguard’s institutional investor group, in Malvern, Pennsylvania, says, “Employees’ expectations [for financial wellness guidance] is increasing, and that’s something that the Vanguard plan sponsors we serve are watching and responding to.” 

Vanguard credits plan sponsors’ adoption of automatic enrollment and automatic escalation for deferral rates staying steadfast through the pandemic, the ensuing market volatility and recent spiking inflation. But, nonetheless, plan participants continue to save below the industry’s recommended savings rate of 12% to 15% of income.  

During the last 12 months, 45% of this year’s survey respondents increased their deferral rate, and 10% decreased it.  

At what age do respondents hope to retire? Thirty-seven percent said at 62.5 or earlier, and 25% have set their sights on 65. Fifty-four percent are confident or very confident that they will achieve a comfortable and secure retirement by their planned retirement age, yet only 11% of respondents said they had calculated their retirement savings needs within the last year.  

Employees’ ultimate goal is financial independence, according to Jeff Cullen, managing partner at Strategic Retirement Partners in Shorewood, Illinois. “It’s being able to do what they want to do, not what they have to do,” he said, speaking at a retirement symposium, given by LeafHouse Financial, this fall. “For the people living paycheck to paycheck, they need a coach, not a financial planner. Those further along financially will need more.” Increasing personalization of financial wellness education, he said, may be the wave of the future to get them there. —Judy Faust Hartnett

Art by Miriam Martincic