By SJS Senior Vice President & Director of Financial Institutions Craig Huntington.
Economic turmoil and seismic shifts in unemployment, consumer income, and savings have led to widespread uncertainty for the household finances of many. In spite of all of the uncertainty, SJS still believes that retirement plans remain a vital tool for American families to take control of their savings for retirement.
What do plan sponsors find important when it comes to structuring and managing retirement plans for their participants? Recently, Fidelity released the results of its 2020 Plan Sponsor Attitude Survey, using information from over 1,500 plan sponsors. SJS would like to highlight a few key takeaways from this survey, and provide details of how we have worked with plan sponsors to address their concerns and accomplish their goals.[1]
Why Offer A Retirement Plan?
From the survey, we learn that employers offer retirement plans for four primary reasons:
Ensure participants save throughout their working years (45% of plan sponsors agreed)
Provide adequate retirement savings to successfully replace participants’ income in retirement (20%)
Retain and recruit top employees (18%)
Remain Competitive in marketplace (17%)
Retirement Plan Concerns
Additionally from the survey, we learn that plan sponsors are particularly concerned about the following when designing and implementing a retirement plan:
Whether or not the plan is effectively preparing employees financially for retirement (27% of plan sponsors agreed)
Fiduciary responsibilities (18%)
Reducing business costs related to the plan (17%)
Whether or not the plan is helping to attract top talent (13%)
Whether or not the plan is helping to retain top employees (13%)
Increasing Participant Savings - Retirement Plan Features
Over SJS' 20+ years working with retirement plans and plan sponsors, we have learned that various plan features can significantly increase participant savings, including:
Setting up auto-enrollment when an employee is eligible to participate in your retirement plan
Increasing the default savings rate for your participants
Choosing investment options with lower expense ratios and more diversification
Improving your plan’s default investment choice (using low-cost well-diversified target-date funds)
Improving your employer matching formula to encourage more employee saving
Adding auto-increase / auto-escalation savings program, so your employees agree ahead of time to save an increasing percentage as their compensation increases
Providing a Roth savings option
Allowing your employees to contribute 100% of compensation up to legal limits
Improving your plan’s vesting rules
Scheduling the plan’s investment advisor to meet with your plan participants annually to educate them and answer questions
Sending emails to remind your participants of their current contribution levels, and demonstrate the potentially positive impacts of higher contributions
Introducing you to and collaborating with reliable, experienced, low-cost recordkeeping and administrator firms
Value Of An Advisor
As a plan sponsor, you may work with an investment advisor to aid in determining that your retirement plan investments are appropriate for your employees and to help you stay current with managing plan investments. Large and small employers want to better understand how their retirement plans are working for employees and how they can improve their plans as their business grow and change. As an investment advisor, SJS can work with you as you shoulder these responsibilities and you look to limit your liability and manage your risks.
Working with an investment advisor that is experienced in retirement plans can really help you as a plan sponsor to deliver a positive experience for your participants.
If you would like help in reviewing your retirement plan, please feel free to reach out to us. We are always here to listen and assist.
Craig Huntington has worked in the financial services industry for more than 20 years and oversees the financial institution channel at SJS. Craig is based in Naples, Florida. To contact Craig, you can email him at chuntington@sjsinvest.com or call him at +1-239-404-1925.
Important Disclosure Information and Sources:
[1] “2020 Plan Sponsor Attitudes Survey.“ Fidelity Investments & Harris Insights and Analytics, 2020, institutional.fidelity.com.
Advisory services are provided by SJS Investment Services, Inc.., a registered investment advisor with the SEC. Registration does not imply a certain level of skill or training. SJS Investment Services does not provide tax advice. Please consult your tax professional for specific advice. This material has been prepared for informational purposes only.
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