Savers more interested in their money than election

Amid the volatility of U.S. electoral politics, participants in defined contribution plans say they have other things on their minds, according to plan sponsors and DC consultants.

They say some of the more common questions from participants are: When will the company match be restored? Are they saving enough? How should they allocate their retirement funds? What should they do if furloughed? What's the best strategy for withdrawing funds?

DC consultants and sponsors say that while some inquiries this fall were linked to the presidential election, more appear to be based on issues that have usually been on participants' mind, and that the election — as well as the coronavirus pandemic — served as catalysts for them to seek answers.

"People wanted to do something but not many said it was urgent," said Kelli Send, principal and senior vice president for participant services at plan consultant Francis Investment Counsel LLC, Brookfield, Wis.

Among 571 participants' questions asked of the firm's advisers between October and mid-November, the biggest participant concern focused on allocation strategies, Ms. Send said. However, only a small percentage of the allocation-strategy group said they were very concerned about the stock market. "I can't tell if this was just concern or concern about the election," Ms. Send said.

Other prominent participants' questions to the advisers during this period covered adequate savings; comparing a Roth plan vs. a traditional pre-tax retirement plan; budgeting; and debt repayment.

For those who did cite electoral politics, Ms. Send said it was her and advisers' observations that participant concerns appeared to focus on President-elect Joseph Biden and what might happen during a Biden administration. Four years ago, political-oriented concerns focused on the possible effects of Donald Trump's election.

"I think it reflects the very nature of the investor uncertainty caused by national elections resulting in the fear that policies may change if your guy doesn't win," she said.

There was "definitely some election uncertainty and subsequent reactionary fund transfers and future allocation adjustments" this fall, noted Cindy Rehmeier, who runs the $2.5 billion Missouri Deferred Compensation Plan in her role as manager of defined contribution plans for the Missouri State Employees' Retirement System, Jefferson City.

However, election-related commentary "has not been as much as expected," she wrote in an email.

Ms. Rehmeier wrote that the reaction might have been tempered due to a YouTube video created by her team describing how markets respond to elections. There are "no obvious patterns" between stock market performance and a presidential election, the video says. "Try to keep politics and investments separate."

The election did serve as a catalyst for deferred compensation plan participants, many of whom "are closing in on retirement or are at retirement," Ms. Rehmeier wrote. "They want to know if they did retire at 'X' date in the future, how they would be able to withdraw funds, the taxes and penalties associated with those withdrawals, etc."

Contrasting current participant responses to those of past events that sparked market volatility, Ms. Rehmeier wrote that "a lot of volume and differences from previous periods is surrounding the uncertainty associated with COVID-19."

Participants are worried about losing their jobs, being furloughed or having their existing jobs changed "that would make them want (or) need to retire," she explained. Workplace uncertainty "has expedited the retirement" of some eligible participants or those concerned about their health, she added.

One corporate DC plan manager, who requested anonymity, detected "no single question" about the election from participants contacting the plan's record keeper. The manager attributed the muted response to an intensive education program over the years. "They know what to do," said the manager, whose plan has assets of more than $750 million.

Their biggest concern is "when is the match coming back and when will Roth be implemented," the manager said. The match was suspended in January 2020 and is being reinstated during the fourth quarter. The company will pay 50 cents for each $1 dollar contributed by participants up to 6% of annual pay. The Roth plan will take effect during the second half of 2021.

However, deferral rates have held steady this year. "I thought they would go down because there was no match," the manager said.

"People are asking, 'Am I saving enough? Am I on target?'" said the manager, adding that participants are directed to the plan's record keeper for one-on-one counseling.

Cheri Klyn, director of shared services at Vermeer Corp., Pella, Iowa, said the few calls she received from participants during the fall focused on questions like "should I move out of the stock market with the election coming up?"

For participants in Vermeer's $384 million 401(k) plan, "it's pretty much business as usual," said Ms. Klyn, attributing the responses to her company's continuing efforts to educate participants about long-term investing. The participation rate is now about 98% compared with 94% to 95% at the beginning of the year, she said. The average employee contribution rate during this same period rose to 9.1% from 7.7%.

Ms. Klyn's comments were endorsed by Nick Austin, a consultant at intellicents Inc., Vermeer's investment fiduciary and investment adviser. "We received maybe five or six calls" from Vermeer participants, Mr. Austin said. "They were concerned about market volatility in general."

Mr. Austin noted that participants also didn't act dramatically in the early months of 2020 when the coronavirus torpedoed the stock market and the economy. "People are in it for the long haul," he said.

The Vermeer plan has an automatic increase provision that takes effect every April 1, adding 1% of salary each year to participants' contributions. "We were concerned about a wave of opt-outs, but it didn't happen," Mr. Austin said. The plan's initial deferral is 6% of salary, and the auto increase goes up 1% of salary annually until the combined amount reaches 12%.

At Unum Group, "there was not a lot of uptick (in participant questions) before or after" the election, said Carl Gagnon, assistant vice president, global financial well-being and retirement programs, at the Chattanooga, Tenn.-based company. "There was nothing unusual."

Calls from participants focused on account balances as well as the terms of the CARES Act, he said.

The company encourages participants to "stay the course," augmenting its communications with more video-based investment education, he said. Unum's DC plan has $1.7 billion in assets; its defined benefit plan, which was closed to new employees in 2013, has $2 billion in assets.

Mr. Gagnon said he saw a difference in participants' questions between the 2008-2009 financial crisis vs. the coronavirus crisis. Calls during the financial crisis "were more specific to investing," he said. The crisis "impacted people most near retirement," while the coronavirus crisis impact" is much broader."

Financial services consultant Jason Chepenik said he can expect to hear from the same people calling about any major event, but this group represents "maybe 50" of the 130,000 participants among his clients.

"There was much more activity at the beginning of the pandemic — about five times the election calls," said Mr. Chepenik, an Orlando-based senior vice president of OneDigital, a benefits and financial consulting firm. "There was more anxiety around this election, but we tell them the president doesn't control the economy," said Mr. Chepenik, whose retirement plan clients range from start-ups to those with assets of $250 million. He counsels participants to avoid trying to time the market due to an election — or any circumstance. "Timing doesn't work," he said.

The most anxious participants have small account balances and/or are close to retirement, Mr. Chepenik said. He has fielded calls from participants worried that federal estate tax rules would be tougher during a Biden administration and from others fretting about the market being overpriced. "We say save as much as you can and don't have debt," he said. "Don't look at the market. Look at your pocketbook."