3 investment changes, 4 design changes sponsors are making to retirement plans
Employee retirement preparedness is among the primary concerns for plan sponsors -- so what are they doing about it?
Many retirement plan sponsors are keeping their employees’ interests at the top of their priority lists — and tweaking plans accordingly, a recent study suggests. Three investment changes and four plan design changes top the list of the most common ways they are adjusting plans.
Related: Here are 7 ways 401(k)s have changed in just 5 years
That’s according to Fidelity Investments’s latest Plan Sponsor Attitudes Study, which indicated that plan sponsors are continuing to make changes to their plans in an effort to improve their offerings. The study reports that plan sponsors are most concerned about preparing employees for retirement financially, with 27 percent of respondents citing this as their top concern. To that end, over the last two years, 74 percent of survey participants reported making changes to their investment menus, and 82 percent said they’ve made plan design changes.
The most commonly reported investment changes were to increase the number of investment options, replace an underperforming fund and add a target-date fund.
In terms of plan design, company match was a clear priority for sponsors, as adding a matching contribution, increasing the matching contribution amount and changing the matching formula represented three of four top changes made over the past two years, Fidelity Investments noted in a press release. Adding a Roth contribution option rounded out the four most common changes.
While current market forces may prompt some new conversations regarding plan design, when Fidelity separately surveyed about 900 plan sponsors during a plan sponsor webinar in mid-April, 63 percent said they are not considering a reduction or suspension of their company match. And according to data from Fidelity recordkept plans, 10.1 percent of participants increased contributions in April 2020 versus 8.9 percent in April 2019. However, 2.5 percent stopped contributing this year compared to 1.5 percent last year.
The February study also found that 92 percent of plan sponsors reported they work with plan advisors, and, further, that 70 percent are “very satisfied” with their relationships. Sponsors with advisors also reported being more satisfied that their plans are achieving company and participant objectives than those without.
“While supporting their employees’ retirement readiness has always been a top priority for plan sponsors, the current market crisis has accelerated its importance,” Liz Pathe, head of DCIO sales for Fidelity Institutional Asset Management, 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.”
The study also noted that 44 percent of plan sponsors reported that they review performance of their plans’ investment options at least quarterly, down from 58 percent 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.”
Other plan sponsor concerns? Eighteen percent of plan sponsors cited concerns over fiduciary responsibilities, followed by another 17 percent that reported reducing business costs related to the plan as their main concern.
The study, released May 18, surveyed 1,555 plan sponsors between Feb. 2-24.
Sarah Tincher, based in Austin, is the managing editor of Corporate Counsel and The National Law Journal. Contact her at stincher@alm.com. On Twitter: @sarahntincher
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