Plan sponsors in a new study say their top concern is whether their plan effectively prepares employees for retirement financially, a finding consistent with previous years, Fidelity Investments reported Monday.
The study also showed that plan sponsors continue to make changes to their investment menus and plan designs in an effort to improve participant outcomes.
“While supporting their employees’ retirement readiness has always been a top priority for plan sponsors, the current market crisis has accelerated its importance,” said Elizabeth Pathe, head of DCIO sales at Fidelity Institutional, said in a statement.
“Plan sponsors are looking for guidance and reassurance during this difficult time, and we continue to see plan advisors playing an important role in helping companies identify ways to improve their retirement plans and help their employees strengthen their financial well-being.”
Fidelity conducted an online survey between Feb. 2 and Feb. 24 among 1,555 employers that offer retirement plans that use a wide variety of recordkeepers.
During a webinar on March 30, in the midst of market volatility due to the coronavirus pandemic, Fidelity also polled 956 plan sponsors that keep records with Fidelity, and found that their top concern was employee financial well-being.
Good Value From Advisors
As part of its new study, Fidelity reviewed data following the 2008 financial crisis for perspective on plan sponsors’ areas of focus during that earlier period of uncertainty.
In 2010, 35% of sponsors said the chief reason they had decided to begin using a plan advisor was to receive help with plan investments, especially given the market situations.
This year, sponsors’ top reason for working with an advisor, cited by 29% of respondents, was to obtain assistance with the increasingly complicated process of managing a retirement plan.
Plan investments will likely become an area of focus again, according to Fidelity. Asked how their plan advisors underscore their value, 56% of sponsors said performance of plan investments. Overall, 53% of sponsors said a desire for better performance investment drove menu changes.
Seventy-four percent of plan sponsors have made changes to their investment menus in the past two years, the survey showed: 28% to increase the number of investment options, 23% to replace an underperforming fund and 23% to add a target date fund.
Forty-four percent of sponsors reported that they reviewed performance of their plans’ investment options at least quarterly, down from 58% last year.
“In our conversations with plan sponsors and advisors, investment performance is now top of mind given the potential for continued market volatility,” Pathe said. “Plan advisors can play a more active role by proactively reviewing plans’ investment menus with sponsors and working to address their concerns.”
Changes to Plan Design
Eighty-two percent of plan sponsors reported that they had changed plan design in the past two years.
The survey indicated that company match was top of mind for sponsors, given that three of the top four changes over the past two years were adding a matching contribution, increasing the matching contribution amount and changing the matching formula. Adding a Roth contribution option rounded out the top four changes.
The 2020 study showed that plan sponsors who work with advisors had made certain constructive plan design changes at a rate several percentage points higher than those without advisors, including increasing the auto-enrollment deferral rate, adding a Roth contribution option and adding automatic increase.
Fidelity said plan sponsors may be assessing changes to plan design given the current market environment, including the matching contribution. However, when Fidelity separately surveyed 914 plan sponsors in mid-April, 63% said they were not considering a reduction or suspension of their company match.
The Full Financial Picture
Many plan sponsors and plan advisors see the value of implementing programs that go beyond retirement preparedness to support employees’ financial wellness, healthcare and student debt payments. These programs may be especially valuable for employees during these difficult times, Fidelity said.
Fifty-seven percent of plan sponsors said they offered financial wellness programs to employees — 59% of those with advisors, compared with just 38% of those without advisors. Of plans with such programs, 61% reported that the programs have had a strong positive effect on employees.
Fifty-six percent of sponsors said they offered a High Deductible Health Care Plan, and of those that do, 86% also offer a Health Savings Account. Fidelity noted, however, that employees may not fully understand the benefits of HSAs, as sponsors offering them reported that only 40% of all employees chose to enroll.