PLANADVISER - January/February 2022 - 27

" Individual employees are starting to look around and
evaluate other employment options, so we're seeing a heavy
focus from employers, right now, on retention, " Gottfried
says. " They might not explicitly articulate it, but employees
are thinking about how their employer supports them. "
Nearly three-quarters of workers polled by Betterment
said they would be inclined to leave their employer for a
job that offered better financial benefits. When asked what
type would entice them, a 401(k) match was among the top
answers, with 56% of those surveyed citing it.
Plan sponsors have been taking note; for instance, large
employers such as KPMG and Boeing recently announced
increases to their employee match. Advisers may participate
in scenario planning with the plan sponsor to help
it consider how various plan changes might affect its
company, based on hiring trends; current participation
and deferral rates; and automatic features.
CLIENT CONCERN: " We're not sure an in-plan annuity makes
sense for our clients. "
ADVISER RESPONSE: " There are plenty of other income solutions
we can discuss. "
Keeping retirees, and their assets, in a 401(k) plan is
increasingly a priority for plan sponsors. Nearly threequarters
of those surveyed last year by PIMCO said they
prefer to retain retiree assets-up from less than half of
sponsors in 2015. But there are multiple ways to go about
meeting that objective.
" At Voya, we recognize that there is no one-size-fits-all
approach to a retirement income solution, " Armstrong says.
" Employers should consider providing several solutions to
meet the diverse needs of their employees, or start with a
simple solution and [develop] options and a default solution
over time. " -Beth Braverman
BOOSTING THE BASICS
E
ven if clients use the design best
practices cited below, the adviser can
still add value. He can encourage the
sponsor to make tweaks that increase
the following features' effectiveness.
Auto-Enrollment
CLIENT CHALLENGE: Automatic enrollment
does a great job of getting employees
into a plan, but when the enrollment
deferral rate is too low, many
employees fail to contribute enough to
build adequate savings.
Importantly, though, experts note,
if the automatic deferral rate is lower
than what the participant contributed
at his previous job, he will probably
accept being enrolled at a higher rate.
CLIENT NEXT STEP: By boosting the initial
deferral
rate,
companies
can help
workers make progress faster toward
their retirement goals. " We used to talk
about moving from 3% to 5%; now we
talk about moving to 8%, " says Matthew
Eickman of Qualified Plan Advisors.
Auto-Escalation
CLIENT CHALLENGE: Because employees
change jobs so often today, an automatic
increase of 1% per year-especially
for plans with a relatively low
CLIENT NEXT STEP: Building-or improving-
an integrated platform through which
employees can see, and access, all of
their benefits in one place can improve
both engagement and outcomes.
initial deferral rate-means workers
may never reach meaningful contribution
levels.
CLIENT NEXT STEP: Increasing the size of
automatic increases help employees
make progress more quickly. Voya
recommends that employers set the
amount at 2% a year with a cap of 15%,
says the company's Tom Armstrong.
" We've found that the higher escalators
do not cause negative effects
and that people tend to stick with the
higher contribution rates, " he says.
Integration With Other Benefits
CLIENT CHALLENGE: Both employees and
plan sponsors have learned over the
past year that true financial wellness
does not exist in a vacuum apart from
their physical and mental health.
" Both employers and their employees
are increasingly looking at the value
of benefits in relation to the total net
outcome of health and wealth solutions-not
the gross outcome of wealth
or health individually, " Armstrong says.
Matching
CLIENT
CHALLENGE: Employees often
contribute only enough to their retirement
plan to get their employer match.
CLIENT NEXT STEP: Implementing a stretch
match, such as 50% for the first 4% and
100% for 8% may incentivize workers
to contribute more, without
increasing
the contribution amount and expense
for the employer, Armstrong says.
" The stretch match is most effective
when it's implemented in conjunction
with auto-escalation, " Armstrong says.
" If you really want to move the needle,
that combination is powerful. "
Roth 401(k)
CLIENT CHALLENGE: In 2020, 86% of plans
provided a Roth 401(k) option for
their employees, but just 26% of those
workers elected to adopt it.
CLIENT NEXT STEP: By creating communications
about who might benefit from a
Roth, sponsors can help their participants
understand whether this option
might make sense for them.
" At some point, tax rates have to go
up, so there may be a desire to have
some diversification with future tax
obligations, " Eickman says. -BB
planadviser.com January-February 2022 | 27
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PLANADVISER - January/February 2022

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