How not-for-profits are taking responsibility to encourage positive savings behaviors

Although most not-for-profit organizations believe they have a responsibility to encourage their employees to save for retirement, only 10.6% those organizations are able to measure potential participant outcomes as part of their retirement plans, according to a new survey of 403(b) plan sponsors from the Plan Sponsor Council of America (PSCA), which was also sponsored by the Principal Financial Group®. The survey revealed that 27.1% of plan sponsors feel they have a responsibility
to encourage savings and are taking measures to do so, while another
25.8% acknowledged that same responsibility and know they need to
do more to support positive savings behavior.

More than a third of respondents (35.0%) reported they encourage their employees to save but don’t want to “force it,”and only 10.3% felt by offering a plan they fulfill their responsibility as an employer. PSCA’s Attitudes Towards Retirement Readiness in 403(b) Plans reflects responses from 381 not-for-profit organizations that currently sponsor a 403(b) plan.

“It’s no surprise the majority of not-for-profit organizations recognize the important role they play in helping their employees prepare for retirement,” said Bob Benish, executive director of PSCA. “We continue to see 403(b) plan sponsors make progress in building better retirement programs, and encouragement and education are key factors in helping participants create positive outcomes.” Just 10.6% of 403(b) plan sponsors are monitoring potential participant outcomes by providing their participants with access to modeling and income-stream projections offered through the plan service provider.

Include desired outcome. “When saving for retirement, it’s important to include a desired outcome or personalized goal within the process,” said Aaron Friedman, national tax-exempt practice leader at The Principal® “It’s encouraging to see some plans are already measuring potential participant outcomes, but we believe it’s something all plans should be doing to help participants know whether they’re on track for a more secure retirement.”

Automatic enrollment. When asked whether they consider automatic enrollment as a way to improve retirement outcomes for participants, 47.9% of plan sponsors answered yes, while 27.9% said no and 24.2% were unsure. More than a quarter of respondents (27.5%) indicated they have an automatic enrollment feature built into their plan, and another 8.8% said participation in their plan is mandatory.

“Traditionally, not-for-profit organizations have been characterized as paternalistic toward their employees. Many provide very generous retirement savings plans, but simply having the benefit available doesn’t mean everyone takes advantage of it,” Friedman said. “That’s where automatic enrollment can be beneficial.”

Education and financial wellness. According to the survey, half the organizations (50.4%) are equally concerned about all employees saving enough for retirement, no matter their age. The next most concerning group is Millennials (18.1%), followed by Generation X (14.4%). Just 15.8% of respondents target their plan education materials to specific age segments. But nearly a quarter of plan sponsors (23.2%) offer a holistic financial wellness program beyond the retirement plan, which could include education on health care, debt management, financial planning and saving for college. Another 20.3% plan to add a similar program in the future. “It’s crucial to be able to see the whole picture when it comes to financial wellness,” Benish said. “I commend those plan sponsors already offering holistic financial wellness programs and think it’s a positive that so many more have plans to.”

More information is available at www.psca.org.

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