Plan Sponsor Clients Could Do More to Enhance Participant Retirement Readiness

The Transamerica Center for Retirement Studies makes suggestions in a new report for how employers can take steps to enhance retirement security for workers.

The Great Recession officially lasted from December 2007 to June 2009 but it’s after effects continue to linger today according to a report from the Transamerica Center for Retirement Studies, “A Retirement Security Retrospective: 2007 Versus 2017.”

Questions continue to be asked about the status of the recovery among employers and workers. How has retirement security changed? What are areas in need of improvement? Transamerica Center Retirement Studies (TCRS) prepared this report based on findings from its annual retirement survey of workers and employers.

Catherine Collinson, CEO & President Transamerica Institute and Center for Retirement says “Our nation’s retirement system and, specifically 401(k) plans, demonstrated strong resilience throughout the Great Recession and subsequent economic recovery. Plan sponsorship rates among employers remained steady–and some employers enhanced their plans with additional features. Workers’ plan participation and contribution rates also remained strong. Savings in all household retirement accounts have dramatically increased since their pre-recession levels, with Millennial’s experiencing a four-fold increase, followed by Generation X and Baby Boomers whose accounts have more than doubled. However, more work can and should be done by workers, employers, and policymakers to further improve retirement security in the U.S.”

The report’s specifics recommendations for employers include the following:
  • Offer a retirement plan or achieve efficiencies by joining a multiple employer plan (MEP).
  • If a plan is not already in place, take advantage of the tax credit available for starting a retirement plan or joining an MEP.
  • Offer other health and welfare benefits that can enhance and protect workers’ long term financial security. Benefits such as health insurance, disability insurance, life insurance, employee assistance programs, workplace wellness and financial wellness programs, long term care and other insurance can help protect employees’ overall security.
  • Extend retirement plan eligibility to part time workers or, if not practical, provide workers the ability to contribute by payroll deduction to an IRA.
  • Consider adding automatic enrollment and escalation features to increase retirement plan participation and salary deferral rates, if needed.
  • Limit the number of loans available in the retirement plan. Educate employees about the ramifications of taking loans and withdrawals from retirement accounts. Educate employees about the need to prepare for emergencies and non routine expenses to avoid incurring excessive debt.
  • Structure matching contribution formulas to promote higher salary deferrals e.g., instead of matching 100% of the first 3% of deferrals, change the match to 50% of the first 6% of deferrals.
  • Provide education about saving and investing that is easy to understand.
  • Offer information about the Saver’s Credit, calculating a retirement savings goal, principles of saving and investing. For new hires, provide education about the plan and, if available, the option to roll over their accounts from previous employers into the plan.
  • Offer pre-retirees greater levels of assistance in planning their transition into retirement—including education about retirement income strategies for managing savings to last their lifetime; retirement plan distribution options; and the need for a backup plan if forced into retirement sooner than expected (e.g., health issues, job loss, family obligations). Provide information about Social Security and Medicare.
  • Create opportunities for workers to phase into retirement by allowing for a transition from full-time to part-time and/or working in different capacities.
  • Foster an aging friendly work environment and adopt diversity and inclusion business practices that include age among other commonly referenced demographic factors (e.g., gender, race, religion, sexual orientation).

Recommendations are also offered for employees and policy makers in the full report.