Non-profits to increase focus on retirement income and financial wellness in 2022
More non-profit organizations with 403(b) retirement plans are prioritizing retirement income options in 2022, with the number of plan sponsors citing guaranteed income as a top priority more than doubling since last year, according to a new Plan Sponsor Council of America (PSCA) survey, sponsored by Principal Financial Group®.
The PSCA conducted a survey of 139 non-profits in October 2021, finding the top priorities for plan sponsors had shifted in a few key areas since surveying done before the pandemic. This included an increase in focus on retirement income solutions in plan design, as well as a 45% jump in prioritizing financial wellness tools—just over 12.3% of surveyed organizations did so this year, versus 8.5% in the prior survey.
“Though increasing plan participation and ensuring plan compliance are always top of mind for plan sponsors, we are seeing a shift in other plan priorities as organizations increasingly look to provide tools and support that will increase the long-term financial security of employees,” said Hattie Greenan, director of research and communications at PSCA.
The top 10 403(b) plan priorities for 2022 as compared to 2020 are:
| Priority | 2020 | 2022 |
|---|---|---|
| Increasing Participation Rates | 21.7% | 22.5% |
| Plan Compliance/Reducing Fiduciary Liability | 31.4% | 21.7% |
| Providing Retirement Income Options for Participants | 6.2% | 13% |
| Providing Financial Wellness Tools | 8.5% | 12.3% |
| Increasing Deferral Rates | 12.4% | 10.1% |
| Enhancing Participant Education | - | 8% |
| Reducing Plan Cost | 7.8% | 5.1% |
| Changing the Investment Lineup | 6.2% | 2.2% |
| Conducting an Advisor or Consultant Search | 1.9% | 1.4% |
| Conducting a Recordkeeper Search | .8% | 1.4% |
Asked to single out the overall primary objective for their 403(b) plan in 2022, 60% of organizations said they want to maintain their current plans as they are now—a challenge for many in the wake of the disruptions caused by the response to the COVID-19 pandemic, including financial and staffing concerns. Indeed, this was followed by the objective of using the plan to retain employees, reflecting the pressure non-profits are facing amid the current labor shortage.
A powerful tool in that retention strategy looks to be the employer matching contribution. According to the survey, the pandemic has not greatly impact employer contributions to 403(b) plans. Most organizations (89.1%) have not made any changes to employer contributions, and only 1.4% of plans indicated that contributions are still suspended with no plans to restore them.
“The resilience of non-profit 403(b) plan providers in light of what they have been experiencing over the past two years has been impressive,” said Kevin Morris, vice president and chief marketing officer, Retirement and Income Solutions at Principal®. “The increased focus on retirement income options and financial literacy is a positive sign toward improving overall financial security for employees in 2022 and beyond.”
Virtual education here to stay
Since last year, nearly a quarter (23.3%) of plan sponsors noted an increase in online education and 18% indicated an increase in webinars. These boosts in virtual options, rather than fading away, seem poised for further innovation and growth. About 46% of plan sponsors say they will engage a financial professional to support their employee education efforts in 2022.
The impact of managing employee education differed depending on the size of the organization. Large organizations were much more likely to have adjusted education methods (72.7%) versus smaller organizations (10.4%).
“The shift in employee education methods to virtual options due to the pandemic appears here to stay,” said Morris of Principal. “We are seeing a similar trend at Principal across both 403(b) and 401(k) plans and will be working with financial professionals and plan sponsors to ensure the best possible education options are available for employees.”
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US retirement
Lauren Vespa