Like defined contribution plan executives, record-keeper officials wish 457 plans would gain greater opportunities to use auto enrollment, but they add that sponsors have taken other steps — many of them virtual — to educate and encourage participants amid the economic ravages of the coronavirus pandemic.
"If I look back on 2020, I would say that generally, participants and plan sponsors worked hard together to hold the course while serving their communities through the pandemic," said Orlando Cruz, senior vice president and chief revenue and sales officer at ICMA-RC, the Washington-based public-sector record keeper.
"Among clients, 457 contribution deferral rates were static across our participant base between 2019 and 2020," he added.
"Local government staffing excluding education was down 4.1% for the 12-month period ending November 2020. What we heard from our clients was that there were temporary furloughs or delayed hiring of staff," Mr. Cruz said. "Our new employee enrollment totals were 3% off 2020 forecasted models as a result of our decision to quickly pivot to a virtual model, as well as work with our plan sponsors to provide relevant education and guidance in a manner of their choosing."
The virtual model approach, he added, allowed for "shifting the workday to accommodate participants at the hour and day of their choosing. Traditional 9-to-5 of meeting participants during the workday is a thing of the past."
ICMA-RC experienced a significant increase in participant attendance for certified financial planning webinars — up 386% in 2020 vs. 2019.
"Additionally, to simulate the workplace face-to-face experience, we have instituted a policy that all client interactions must occur via videoconference unless the client prefers otherwise," he added.
Acknowledging the challenge of many states' anti-garnishment laws that prevent 457 plans from offering auto enrollment, Mr. Cruz said managed accounts may be a way to increase participants' investing.
"The use of managed accounts is still pretty much in its infancy" in 457 plans, he said.
About 10% of his firm's clients offer managed accounts. "You can't just put this on the (record-keeping) platform and leave it up to participants," he added. "You need to offer advice."
Sponsors are trying to expand participation and investing through a greater use of technology such as online enrollment, said Amy Heyel, the Savannah, Ga.-based senior vice president and national practice leader of government markets for Voya Financial Inc.
"Many 457 plans do have online enrollment," she said. "However, some government plan sponsors still use paper forms to enroll, change deferrals and process withdrawals, so modernizing is a focus."
Modernizing can be a challenge. "This is not always possible for some government plan sponsors who have limited software and human capital constraints along with privacy considerations," said Ms. Heyel, whose company is a record keeper for 3,700 government 457 and 401(a) plans, according to internal company data as of Sept. 30.
In response to the pandemic, sponsors "moved participant educational meetings to virtual and adjusted any manual on-site forms to electronic intake processing," she added. "This was also the case with RFP responses, which are typically required in hard copy."
Among the most popular topics offered by a Voya digital platform are "navigating market volatility, staying the course and financial wellness," Ms. Heyel said. Sponsors also are using "more personalized messaging" to participants and providing more demographic information to record keepers "so we can target under-savers."
