The pandemic had a significant impact on how defined contribution plan sponsors conducted their business last year, and it will continue to influence their decisions through the remainder of 2021.
The independent investment consulting firm NEPC recently conducted a flash poll of sponsors in public, health care and corporate organizations about the impact of COVD-19 and their priorities for 2021. Among the key findings:
Health care industry retirement plans were heavily affected. Although half of all respondents reported furloughs or layoffs in 2020, that percentage climbed to 66 percent for health care organizations. Twelve percent overall suspended their match last year, and 44 percent of that total were in health care. Another 5 percent adjusted discretionary contributions, and 1 percent changed the match formula.
However, health care organizations expect a relatively quick recovery. No health care respondents expect furloughs in 2021, and all respondents that suspended the match expect to reinstate it this year.
Plan innovation returns to the spotlight. After prioritizing COVID-related initiatives in 2020, 40 percent all respondents expect a return to business as usual this year.
Three-fourths believe participants should stay the course and have their accounts managed professionally for them in target-date funds and managed accounts all or most of the time. Nineteen percent reported an increase in the number of participants using managed accounts last year.
Discussions centered around plan innovation likely will play a central role, with 40 percent of respondents planning to review financial wellness tools and one third considering retirement income solutions.
Investment menus are working. Nearly all respondents (96 percent) are satisfied with their investment menus. Target-date funds in particular may help with this high satisfaction score. One-third of respondents rated their TDF performance as “terrific,” while 59 percent said it was “adequate.” No respondents said they had “disappointing” TDF performance.
Sponsors also expect to do the following:
- Consider the role of active/passive offerings within the program, 19 percent.
- Consider adding additional investment choices, 16 percent.
- Consider the role of growth/value offerings within the program, 16 percent.
- Review the performance and/or appropriateness of the Qualified Default Investment Alternative (if applicable), 15 percent.
- Consider removing existing investment choices, 13 percent.
- Add Environmental, Social, Governance offerings to the program, 5 percent.
Respondents report the following priorities for 2021:
- Review participant communications and messaging, 53 percent.
- Review financial wellness tools, 40 percent.
- Review recordkeeping fees, 33 percent.
- Consider and/or review advice offering, 24 percent.
- Review cybersecurity practices and fraud indemnifications, 20 percent.
- Review auto features, 17 percent.
- Review plan distribution rules, 12 percent.
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