Plan Sponsor Study Reveals Three Key Themes To Help Inform Plan Improvements in 2023
If you’re like most plan sponsors, you know you can always learn something from the findings of a survey of your own peers. When it comes to the role your workplace retirement plan plays in talent recruitment and retention, Morgan Stanley at Work: Plan Sponsor Research Results 2022 discovered three key themes. These themes can help inform the efforts of you, your plan’s financial professional and recordkeeper as you work together throughout 2023 to help make your plan even more competitive in attracting quality employees.
The Match Matters
The Morgan Stanley study found that the amount of a company’s match seems to have a significant effect on employee participation (and the amount of the match is becoming a much more popular question among job candidates). Companies that offer a match of more than 5% are significantly more likely to see higher rates of participation among eligible employees than companies that matched at a lower rate. However, only 17% of companies offer a match more than 5%, with 36% matching 5% and 41% offering between 3% and 5%.
The report suggests that more frequent and consistent employee education and promotion of the match can help encourage participation and increase employee contributions. Consider using a very concise, visually powerful infographic to show how even a smaller matching contribution of 3% can make a difference over 20–30 years due to tax-deferred compounding. And now that SECURE Act 2.0 allows employers to offer matching contributions on a pretax or Roth basis, even a Roth after-tax contribution of 3% can show (via an infographic) the potential of tax-deferred growth over the long term.
Employee Access to a Financial Professional Has Significant Value
The report also emphasized the positives around having a financial professional available to employees (such as the plan’s current one , or a referral to one of their colleagues). Of the employers who reported full employee participation in 401(k) plans, 80% had a financial professional available for assistance and 20% did not. A financial professional can play a central role in not just managing the plan, but helping employees enroll and stay engaged with the plan, navigate inflation, manage market volatility and continue to invest more money toward their future.
More Engaging Participant Educational Content is Needed
Overall, plan sponsors believe the content their participants receive from providers is engaging (87%). However, there were some ways to make it more engaging, including more personalized topics on individual financial stages (44%), content with digital tools (39%), and topics specific to life events (36%). The following suggestions can also help make educational content more effective:
- Including actionable advice: 34%
- Using different messaging mediums (such as video or text/email): 33%
- Incorporating shorter communication formats: 32%
- Simple language commentary on market performance: 29%.
The Morgan Stanley Plan Sponsor study can be found at: https://tinyurl.com/y29dbf8t.
DISCLOSURES
Investment advisory services offered through TCG Advisors, an SEC registered investment advisor. Insurance Services offered through HUB International. Tax services offered through RPW Solutions. Although the information in this blog has been compiled from data considered to be reliable, the information is unaudited and is not independently verified.
Tax services offered through RPW Solutions. TCG Advisors does not provide tax, legal or accounting advice. This presentation was prepared for information purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisor before engaging in any transaction.
This website is not authorized for use as an offer of sale or a solicitation of an offer to purchase investments. This website is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation for any security, or as an offer to provide advisory or other services in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction.
