Saving for retirement: Do employer and employee attitudes match?

Employees and employers are not always on the same page when judging how competitive their defined-contribution (DC) retirement savings plans are, a new “Saving for Retirement: Employee and Employer Attitudes Towards Retirement Benefits” survey has found.

The report from Buck, a consulting firm that is part of the Gallagher family of firms, found that although 92% of employers thought their retirement benefit offerings were competitive, 61 % of their employees thought they could find a better retirement package with a different employer.

Buck officials said the findings reflect the economics uncertainties of the day, with many of them having concerns about day-to-day finances as well as long-term savings.

“With rising inflation, it’s not surprising that employees are concerned about their ability to save for retirement and this, in turn, is reflected in the perceived value of employer-sponsored retirement plans,” said Tonya Manning, U.S. Wealth Practice Leader and Chief Wealth Actuary at Buck, a Gallagher company. “DC plans have evolved to become the primary retirement savings vehicle for Americans, and for plan sponsors, the challenge is how to help participants reach their savings goals.”

General satisfaction with plans, but still some uncertainty

The survey found that despite a majority of employees thinking their plan might not be as competitive as some, most were generally happy with the DC retirement plan their company offered. The report said 79% of employees said they were satisfied with their retirement benefits—which was a bit higher than what employers thought. Employer respondents said 74% of employers believed their employees were satisfied with their retirement benefits.

Even though nearly 80% of employees said they were satisfied with their plan, when questioned about whether they thought they were saving enough, the response was more cautious.

The survey found that 27% of employees thought they were definitely saving enough to cover their expenses in retirement, 35% thought they probably were saving enough, 18% didn’t know, 14% said they probably were not saving enough, and 6% said they were definitely not saving enough for retirement.

Again, those worries may reflect current attitudes about the economy and how employees felt about their finances. “It’s an indication of how focused employees are on their immediate cash needs rather than longer term financing of their retirement that, when faced with the option of receiving a $500 pay increase or a $500 increase in contributions made by the company, 53% preferred the raise,” the report said. “Furthermore, 79% of employee respondents would like their employer to offer supplemental savings accounts such as emergency savings, in addition to retirement benefits. Cost of living expenses (35%) and personal debt (20%) were identified as the top two obstacles to saving for retirement.”

David Eisenberg, a principal in the wealth practice at Buck, noted that stress over cost of living and day-to-day finances can have a negative impact on employees’ ability to save for retirement.

“To accumulate sufficient retirement savings to maintain their lifestyle in retirement, it is critically important for participants to maintain adequate savings rates throughout their career,” he said. “Employees often cite the need for emergency savings as an obstacle to retirement savings, and one way for plan sponsors to improve savings rates and retirement plan participation is by implementing more attractive emergency savings benefits.

“Plan sponsors can also use other policies, such as auto-enroll, auto-escalate, reenrollment, and a company match, to encourage employee participation and adequate savings rates,” he added. “In the best-designed plans, all these levers and policies are aligned to encourage and reinforce participation and appropriate savings rates.”

SECURE 2.0 provisions popular with employees

The report went over many more findings about how to better align employee needs with company offerings. One area of discussion was about the recent SECURE 2.0 legislation, which allows employers to provide a retirement account contribution match for student loan payments. The survey said that 57% of employees said they’d like to see this in their plan.

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Eisenberg said that there has been a slow transition to offering this feature but that this could change. “Plan sponsors have been slow to implement the policy and our survey results show this is a popular option,” he said. “One reason for the slow uptake may have been the moratorium on student loan interest and payments. Now this has ended, and payments have resumed, we expect to see continued interest and support for additional relief to student loan borrowers as many employers recognize this could be an important benefit for their workforce.”

The SECURE 2.0 act featured a number of other measures that could be popular with employees, Eisenberg noted, including auto-escalation of employee savings rates, re-enrollment, and other policies to reduce barriers to plan participation. “Matching student loan payments is just one provision employers can use to encourage greater retirement savings,” said. “Deciding which of these policies will have the biggest impact will depend on the characteristics of the participant population.”