Defined contribution experts are expecting a stronger effort in 2016 by plan executives to incorporate broad financial and health matters into programs to help participants better prepare for retirement.
“People don't make decisions in a vacuum,” said Betsy Dill, the Los Angeles-based financial wellness advisory leader for Mercer LLC. “People are more concerned about monthly budgeting rather than planning for retirement.”
As a result, more defined contribution plan executives are offering more forms of financial education such as debt management or college-loan strategies through web-based products as well as group meetings and one-on-one counseling.
Employers recognize that retirement planning “is more complicated than retirement savings,” said Winfield Evens, a partner at Aon Hewitt, Lincolnshire, Ill. “For the employees living paycheck to paycheck or who perceive they are living paycheck to paycheck, how can they save for something that is 20 to 30 years down the road?”
In a survey to be published in early January, Aon Hewitt found that more than half of employers offered at least one type of financial wellness education program and more than one-third offered at least three in 2015, Mr. Evens said.
And by the end of next year, the survey found, more than three-fourths of the respondents said they will offer at least one financial wellness program and more than half will offer at least three, Mr. Evens said. The survey covered more than 250 plans - a mixture of clients and non-clients — with nearly 7 million participants.
“The employer is a trusted source of information, so there is a positive and strong affiliation” between the participant and the employer offering financial wellness solutions, Mr. Evens said. “More sponsors are becoming involved. When I have attended industry events, financial wellness is the topic all the time.”
Consultant Robyn Credico said employers are seeking ways to alleviate participants' concerns about financial wellness so they can improve their DC plan participation rates and savings rates. “If people are stressed about their finances, they don't save more,” said Ms. Credico, the Arlington, Va.-based defined contribution practice leader for Towers Watson & Co.
In addition to providing financial planning tools, DC plan executives are addressing participant overuse of loans from 401(k) accounts, said Ms. Credico, adding some of her clients have 25% to 30% of participants taking loans. “They are concerned about people who use the retirement savings plan as a checking account,” she said. Strategies to combat leakage include reducing the number of loans participants can take, asking record keepers to provide more education on loans and extending the waiting period between paying off one loan and taking out another.
Martha Tejera has noticed a greater interest among her clients in educating participants about budgeting, debt management and other financial matters. Record keepers are providing websites that help participants measure multiple financial and health-care factors to help participants plan accordingly, she said.
“There are only so many dollars,” said Ms. Tejera, president of Seattle-based Tejera & Associates, a DC investment and plan-design consulting firm. “As we look at employees to manage more of their health-care costs, they have to decide how much to put into their 401(k) or HSA.”