Moving Beyond One-Size Fits All Benefits

New research from Nuveen shows a persistently strong labor market means benefits such as 401(k) plans matter to combatting workplace turnover.

The U.S. labor force cares about their benefits to the point where workplace offerings may mean the difference between staying and leaving a job, according to a survey released Wednesday by Nuveen, a TIAA company. 

In a survey of 1,500 full-time U.S. workers, Nuveen, a TIAA company, found that 70% of respondents said they would be willing to switch jobs for better benefits, with younger workers expressing the greatest willingness to move on. 

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

“Rather than viewing benefit as a cost, organizations can seize a competitive advantage by treating them as a strategic investment,” stated Nuveen in its Benefits 2.0 report.  

Nuveen argued that it is in employers’ best interest to create more inclusive benefits that serve their unique workforce. One-size-fits-all benefits packages are ineffective, according to Nuveen, as benefits priorities vary immensely across demographic groups. The prevalence of one-size-fits-all packages reveals that companies lack significant insight and data into what their workers truly want from company benefits. 

The firm pointed out that workers are often vocal about competitive wages but may be “quietly disgruntled” about the portion of their compensation made up of benefits. Younger workers, for example, tend to show greater demand for education benefits, while older workers show a greater desire for more comprehensive retirement benefits and parental leave.  

Guidance Key 

The types of resources plan sponsors and advisers provide employees to help guide them to the right decisions is also an important part of the benefits picture, according to Brendan McCarthy, head of retirement investing at Nuveen.

“With 40% of Americans at risk of running out of income in retirement, participants need financial education and guidance now more than ever,” McCarthy said in an email response. “With this clear need, more and more recordkeepers and advisory/consultant firms are offering an array of financial wellness and advisory services for participants. As such, the plan sponsor may have options for these services that can be provided to their plan participants. As always, plan sponsors should leverage their plan consultant for guidance in selecting the appropriate offering that best positions their participants for a secure retirement.”

Retirement plan design also plays an important role in terms of how employees are set up initially to save, McCarthy said.

“While new employees were defaulted into the TDF/ QDIA, more likely to have age-appropriate risk exposure, the more tenured/ older employees were left behind, and not given a chance to take advantage of auto features, because plan sponsors assume they’d be resistant to change,” said McCarthy. “Very few participants have the necessary expertise when it comes to retirement investing. That’s why the right plan design, and specifically auto features are so important.”

McCarthy said there is value in conducting a reenrollment to enable inclusion of all workers.

Lack of Communication 

A lack of communication about benefits ultimately results in a lack of utilization, Nuveen found. Two-thirds of workers said there is room for improvement, reporting that organizations do not do enough to communicate and explain how their benefits work. In particular, companies are failing to ensure their workers know about, and can fully access, their benefits, with minority groups most likely to report difficulty in taking advantage of them.  

Nuveen suggested that in-person discussions, seminars, mailers and digital outreach can help ensure that benefit details reach all workers and their families through the most receptive channels.  

Benefits platforms should also be accessible and user-friendly to encourage workers to actually take advantage of the available benefits.  

“The average number of places that a worker needs to go to access benefits is … at least three portals. That is a lot,” stated Caroline McGoldrick, health solutions innovation and integrated solutions leader at Aon, in the report. “It’s not just providing the benefit as much as it is actually making sure that that benefit is able to be accessed by your entire population.” 

Nuveen also recommended that employers ask their workers to provide feedback on their benefits’ offerings, as this is the “most efficient and effective way” to learn if an employer’s offerings are meeting participants’ needs. Employers tend to benchmark benefits against those offered by competitors rather than looking internally at whether their benefits are “meeting the real world needs” of their staff, Nuveen found. 

While surveys, focus groups and open discussion forums tend to be underutilized, Nuveen argued that these are effective strategies for employers to use to get feedback about benefits offerings.  

The Benefits 2.0 survey was fielded in October and November of 2023. 

 

IRS Extends Relief on Inherited IRA 10-Year Rule Enforcement

The IRS notice said 2024 will likely be the last year for the relief.

The Internal Revenue Service has again extended transition relief for required minimum distribution rules for inherited individual retirement accounts on Tuesday.

Since the passage of the Setting Every Community Up for Retirement Enhancement Act of 2019, IRAs that are inherited–that is, given to a non-spouse beneficiary–must be completely distributed within 10 years, a requirement known as the 10-year rule. This provision only applies to IRA owners who died after 2019.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

Since RMDs are tied to a beneficiary’s life expectancy, an IRA left to a younger person, such as the IRA owner’s grandchild, would carry very small RMDs since the balance would be divided out by the remaining years of their life. This practice is known informally as a stretch IRA and can be used to pass down large sums of wealth. The 10-year rule limits this practice, though minors who inherit IRAs do not start their 10-year clock until they turn 21. Since distributions are required, a 10% early withdrawal penalty is not imposed.

In February 2022, the IRS issued a proposal that would have required IRA owners subject to the 10-year rule to take an RMD from the account each year until the balance was depleted. The IRS noted that many commenters were caught off guard by this proposal and believed there would be no RMD as long as the balance was distributed at the end of 10 years.

The IRS notice on Tuesday said that the 10-year RMD rule would not be required in 2024, adding to relief made for years 2020 through 2023.

In the notice, the IRS said it expects 2024 to be the last year such relief is granted. The notice said that “the final regulations that the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) intend to issue related to RMDs will apply for purposes of determining RMDs for calendar years beginning on or after January 1, 2025.”

When the IRS approves final regulations, those not in compliance with the RMD will have to pay an excise tax of 25% of the balance they should have withdrawn, or 10% if the error is corrected within two years.

 

«