Plan sponsors of non-profit organizations share similar concerns with their for-profit counterparts regarding the retirement readiness of employees. But, experts say, there are opportunities to improve employees’ outcomes.
Growing anxiety that workers will delay retirement because they do not have enough money is felt by a majority of not-for-profit (NFP) employers (64%), according to a new study. Meanwhile, 59% are worried employees will run out of money in retirement.
At the same time, many NFP plan sponsors — 71% — say a significant challenge is getting workers engaged in a retirement plan, according to TIAA’s Not-for-Profit Plan Sponsor Insights Survey.
Plan sponsors recognize the crucial role personalized support and advice play in employee outcomes, the report says. However, many are unsure of the best way to engage their employees: 81% say they offer one-on-one financial advice services, yet 71% say getting employees engaged in the plan is a significant challenge.
That may be because of a gap between the methods plan sponsors believe to be effective and what they have in place:
· 68% believe financial education designed specifically for different age groups or life stages is effective; however, only 33% offer it.
· 50% believe financial education designed specifically for women is effective, but only 14% offer it.
“Plan sponsors can work with their providers to offer a comprehensive employee engagement program and identify services that may be most effective for their specific employee populations,” says Ron Pressman, CEO of Institutional Financial Services at TIAA.
But success isn’t an easy thing to measure for NFP plan sponsors: 55% say challenges exist in measuring success. According to the study, 27% of sponsors cite participation rates, with 52% tracking these rates for their plan.
“Participation rates are important, but they are just a starting point,” Pressman adds. “The true measure of plans’ effectiveness is whether employees have adequate income throughout their retirement, and feel secure in knowing they won’t outlive their savings. The yardstick for plan success should reflect these goals.”
Ongoing tracking of income replacement rates better enables employers to know if their employees are on track for retirement, the study notes. Most experts recommend that employees aim to replace 70-100% of their preretirement income during retirement. However, a little less than half (47%) of sponsors surveyed think their employees should target an income replacement rate of 70% percent or less.
But as plan sponsors focus on preparing their employees for retirement, many say they are also ensuring they remain compliant under the DOL’s fiduciary rule.
Thirty-eight percent of NFP sponsors say they’re worried about meeting responsibilities as a plan fiduciary, and 31% are concerned of the rule’s impact.
To ensure compliance, plan sponsors report that over the next 12 months they will conduct a formal review of their:
· Administrative fees (39%)
· Investment menu (39%)
· Investment fees (38%)
· Plan design (34%)