What keeps retirement plan executives up at night? That question was posed at a panel at Pensions & Investments' Global Future of Retirement conference, and a dominant source of insomnia for the four panelists was mulling over how to get participants to think of long-term savings.
“One of the biggest challenges we have is not around the plan structure or our design or how well we put together our investment lineup,” said Matt Leckrone, senior vice president, global benefits executive at Bank of America Corp. “It's really how we get employees engaged in long-term savings.”
“We've ... identified some of the key parts of that problem,” Mr. Leckrone said. “It all stems from getting the attention we need on the subject of long-term savings.”
Designing plans is one thing, but Mr. Leckrone said what really matters to him is having the ability to provide the employees the opportunity to “focus on what are those behavioral decisions they can make to get the most out of those plans.”
Bernard “Bernie” C. Knobbe, vice president, global benefits, enterprise human resources at AECOM, said overall financial literacy must improve, and gave the example of how many people stand in line when the lottery reaches a high number and then look at six figures in their 401(k) account and “think they're OK.”
“We have to get better at educating those employees on what that $130,000 really means,” Mr. Knobbe said.
Even with increased employee engagement, there is the difficulty of employees being able to save for long-term as well as short-term necessities such as health care that take up much of their savings.
Mr. Leckrone said of employees who leave Bank of America, 20% with balances of $100,000 or less have been taking a distribution rather than rolling it over into another retirement account.
Darren Philp, head of policy at the People's Pension in the West Sussex, U.K., said engaging participants better can only do so much.
“The problem is that people have only so much income,” Mr. Philp said. “We can all talk about 8% (of a participant's salary) not being enough, but a lot of people are struggling to pay the bills, struggling to keep the lights on.”
Mr. Leckrone also mentioned the attention to health-care costs as an obstacle to participants thinking about retirement.
“I think the bigger problem is we don't have the attention to how important this is as a society,” Mr. Leckrone said. “Health care has certainly become sexier in the employer workplace but that's because we deal with it in the calendar year.”
The perception is “then health care is a necessity, retirement is not a necessity, and without that necessity, we don't have the platform for engagement.”
Greg Williamson, chief investment officer at American Red Cross, Falls Church, Va., said what keeps him up at night is the next 10 years, in which “we're going to go through a period of change that will be profound and radical and one we haven't lived through in human existence.”
Mr. Williamson pointed out the incredible advances in development in the arenas of health care, food production and energy. The bad part of all these advances, he said, is that there is “going to be huge disruption and dislocation as a result.”
He pointed out, for example, how technological advances, particularly in artificial intelligence, will “radically change the way we select securities,” positing, for example, whether active management could be disenfranchised by machines.
Mr. Williamson, in reaction to concern about employee engagement, offered the solution of paying people to engage with their retirement plan “If you want engagement, pay your people to go to the website,” Mr. Williamson said. “Pay them $100 to go to the website. That's an expense you have to pay up front.”
He added that ultimately, “it would be the cheapest solution to get them to participate.”
