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Non-profits to Increase Focus on Retirement Income and Financial Wellness In 2022
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Rhea-AI Summary
In 2022, non-profit organizations are increasingly prioritizing 403(b) retirement plans focused on guaranteed income, with over double the plan sponsors emphasizing this compared to the previous year, per a survey by the Plan Sponsor Council of America. The survey of 139 organizations revealed a 45% rise in financial wellness tool prioritization. While 60% of sponsors aim to maintain existing plans, 89.1% have not changed employer contributions, demonstrating resilience amid financial uncertainties. Virtual education methods are also on the rise, suggesting lasting shifts in employee education strategies.
Positive
Increase in focus on retirement income options, with 13% of organizations prioritizing this, up from 6.2%.
45% rise in prioritization of financial wellness tools, indicating a growing concern for employee financial security.
23.3% increase in online education methods, indicating a shift towards modernizing employee education.
Negative
31.4% to 21.7% decline in prioritization for plan compliance and reducing fiduciary liability.
A decrease in focus on reducing plan costs from 7.8% to 5.1%, which may impact long-term financial health.
Organizations also looking to financial professionals to help enhance employee retirement plan education
DES MOINES, Iowa--(BUSINESS WIRE)--
More non-profit organizations with 403(b) retirement plans are prioritizing retirement income options in 2022, with the number of plan sponsors citing guaranteed income as a top priority more than doubling since last year, according to a new Plan Sponsor Council of America (PSCA) survey, sponsored by Principal Financial Group®.
The PSCA conducted a survey of 139 non-profits in October 2021, finding the top priorities for plan sponsors had shifted in a few key areas since surveying done before the pandemic. This included an increase in focus on retirement income solutions in plan design, as well as a 45% jump in prioritizing financial wellness tools – just over 12.3% of surveyed organizations did so this year, versus 8.5% in the prior survey.
“Though increasing plan participation and ensuring plan compliance are always top of mind for plan sponsors, we are seeing a shift in other plan priorities as organizations increasingly look to provide tools and support that will increase the long-term financial security of employees,” said Hattie Greenan, director of research and communications at PSCA.
The top 10 403(b) plan priorities for 2022 as compared to 2020 are:
Priority
2020
2022
Increasing Participation Rates
21.7%
22.5%
Plan Compliance/Reducing Fiduciary Liability
31.4%
21.7%
Providing Retirement Income Options for Participants
6.2%
13.0%
Providing Financial Wellness Tools
8.5%
12.3%
Increasing Deferral Rates
12.4%
10.1%
Enhancing Participant Education
-
8.0%
Reducing Plan Cost
7.8%
5.1%
Changing the Investment Lineup
6.2%
2.2%
Conducting an Advisor or Consultant Search
1.9%
1.4%
Conducting a Recordkeeper Search
0.8%
1.4%
Asked to single out the overall primary objective for their 403(b) plan in 2022, 60% of organizations said they want to maintain their current plans as they are now – a challenge for many in the wake of the disruptions caused by the response to the COVID-19 pandemic, including financial and staffing concerns. Indeed, this was followed by the objective of using the plan to retain employees, reflecting the pressure non-profits are facing amid the current labor shortage.
A powerful tool in that retention strategy looks to be the employer matching contribution. According to the survey, the pandemic has not greatly impact employer contributions to 403(b) plans. Most organizations (89.1%) have not made any changes to employer contributions, and only 1.4% of plans indicated that contributions are still suspended with no plans to restore them.
“The resilience of non-profit 403(b) plan providers in light of what they have been experiencing over the past two years has been impressive,” said Kevin Morris, vice president and chief marketing officer, Retirement and Income Solutions at Principal®. “The increased focus on retirement income options and financial literacy is a positive sign toward improving overall financial security for employees in 2022 and beyond.”
Virtual education here to stay
Since last year, nearly a quarter (23.3%) of plan sponsors noted an increase in online education and 18% indicated an increase in webinars. These boosts in virtual options, rather than fading away, seem poised for further innovation and growth. About 46% of plan sponsors say they will engage a financial professional to support their employee education efforts in 2022.
The impact of managing employee education differed depending on the size of the organization. Large organizations were much more likely to have adjusted education methods (72.7%) versus smaller organizations (10.4%).
“The shift in employee education methods to virtual options due to the pandemic appears here to stay,” said Morris of Principal. “We are seeing a similar trend at Principal across both 403(b) and 401(k) plans and will be working with financial professionals and plan sponsors to ensure the best possible education options are available for employees.”
The Plan Sponsor Council of America (PSCA), part of The American Retirement Association, is a diverse, collaborative community of employee benefit plan sponsors, working together on behalf of millions of employees to solve real problems, create positive change, and expand on the success of the employer-sponsored retirement system. With members representing employers of all sizes, we offer a forum for comprehensive dialogue. By sharing our collective knowledge and experience as plan sponsors, PSCA also serves as a resource to policymakers, the media and other stakeholders as part of our commitment to improving retirement security for millions of Americans.
Principal Financial Group® (Nasdaq: PFG) is a global financial company with 18,000 employees[1] passionate about improving the wealth and well-being of people and businesses. In business for more than 140 years, we’re helping more than 49 million customers[2] plan, insure, invest, and retire, while working to support the communities where we do business, improve our planet, and build a diverse, inclusive workforce. Principal® is proud to be recognized as one of the World’s Most Ethical Companies[3], a member of the Bloomberg Gender Equality Index, and a Top 10 “Best Places to Work in Money Management[4].” Learn more about Principal and our commitment to sustainability, inclusion, and purpose at principal.com.
[1] As of September 30, 2021.
[2] As of September 30, 2021.
[3]Ethisphere Institute, 2021.
[4] Pensions & Investments, 2020.
PSCS is not an affiliate of any member company of the Principal Financial Group®
Insurance products issued by Principal National Life Insurance Co (except in NY) and Principal Life Insurance Co. Plan administrative services offered by Principal Life. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities, Inc., 800-247-1737, member SIPC and/or independent broker/-dealers. Referenced companies are members of the Principal Financial Group®, Des Moines, Iowa 50392.
What are the key findings of the PSCA survey regarding 403(b) plans in 2022?
The PSCA survey revealed a significant shift towards prioritizing retirement income options and financial wellness tools among non-profit organizations.
How much did the emphasis on guaranteed income options for 403(b) plans increase in 2022?
The emphasis on guaranteed income options for 403(b) plans more than doubled in 2022 compared to the previous year.
What percentage of organizations reported maintaining employer contributions to 403(b) plans?
According to the survey, 89.1% of organizations have not changed their employer contributions to 403(b) plans.
How did the focus on financial wellness tools change from 2020 to 2022?
There was a 45% increase in the prioritization of financial wellness tools, rising from 8.5% in 2020 to 12.3% in 2022.
What challenges are organizations facing regarding their 403(b) plans in 2022?
Many organizations are focusing on maintaining their current plans amidst financial and staffing challenges caused by the pandemic.
