Advisers will play a key role to help plan sponsors implement new investment saving initiatives such as student debt matching and emergency savings coming with SECURE 2.0, according to Jeri Savage, the lead retirement strategist at MFS Investment Management, which just completed a retirement research project.
Only 33% of employers currently offer student loan debt retirement plan matching and 40% offer emergency savings, but half of employers are planning to deliver these financial wellness benefits provided for in the SECURE 2.0 Act of 2022, according to the Defined Contribution Institutional Investment Association’s February 2023 Research Minute.
“At this point, we’re in an educational stage,” Savage says. “SECURE 2.0 was just passed at the end of last year. I would say the industry has been more focused on educating advisers: What is SECURE 2.0, what the provisions mean, when their effective dates may be, whether they are mandatory or optional.”
While there has been increased interest in learning about the new possibilities, Savage says it is too soon for actual implementation.
The two SECURE 2.0 provisions focused on student loan payments—employer contributions matching student loan payments and the ability to set up emergency savings vehicles—don’t go into effect until 2024. Therefore, Savage says any attempt to implement them now comes with additional baggage.
“The biggest challenge for these two is that they are optional provisions, so there’s nothing stating that a sponsor has to implement these,” says Savage. “It’s based on their objectives, their willingness to create the administrative aspect. There’s also a challenge of competing priorities, because there are mandatory provisions that [sponsors] do need to focus on.”
Although emergency savings and student loan debt are often grouped together, Savage says there are some challenges unique to each of the offerings.
“I would say maybe the student loan debt payment is a little trickier, because you’re making employer contributions on participant attestations that they’re paying down their student debt,” says Savage. “But I can also make an argument for the emergency savings vehicle, that it’s setting up a new way of allowing money in. There are some complexities around that as well.”
While student loan matching is not a current option, one in five employers reported they are likely to add the offering, and 27% said they are moderately likely to add the feature, according to the DCIIA. Meanwhile, 12% of employers said they are likely to add emergency savings accounts, and 33% are moderately likely to include them.
While both provisions are focused on trying to get participants saving in their retirement plans, Savage says many workers feel they do not have the money to save effectively, in part due to the effects of the COVID-19 pandemic.
The MFS 2022 Global Retirement Survey asked participants how the pandemic and related economic impacts affected their retirement and retirement saving. In response, 65% said they will need to save more than planned, and 52% think they will need to work longer than planned. Additionally, 11% of people took an early withdrawal, and 9% took a loan.
Savage says advisers and plan sponsors must understand the needs of their participants.
“First and foremost, [the focus for advisers] would be listening to your participants and trying to understand the true demand,” says Savage. “But then in terms of communicating it to participants, for these two provisions, we are focused more on it providing additional flexibility for participants. Hopefully that means they’re more likely to see it in their retirement plan as a result. That’s the bottom line for us.”The study drew responses from 1,000 DC plan participants ages 18 and older, employed at least part-time. Reponses were fielded between March 15 and April 13, 2022.