RESOURCES / PLAN DESIGN

Does my retirement plan work for a diverse workforce?

8-minute read

THE TAKEAWAY

Gain insight and address diverse needs with creative plan design

Overview

Can a single DC plan meet the needs of a diverse workforce?

Plan sponsors are wrestling with how the same DC plan can serve the many different demographics within their employee base. For example, a company’s workforce may skew older, but the plan still must address the needs of younger employees who are just starting out on their retirement savings journey. Sponsors may need to address a diversity of job roles and incomes among their participants. A hospital’s plan has to encompass workers as divergent as physicians and orderlies. An insurance company’s plan needs to work for actuaries and call center employees. Even more complex is recognizing and embracing workforce diversity relative to gender, race, ethnicity, culture and other factors.

 

We recently met with plan sponsors who are evaluating best practices in plan design to meet the diverse needs of their participants. From a plan design perspective, offering access and flexibility is key. Sponsors are also exploring creative ways to help nudge participants into saving more for retirement and diversifying their assets. DC plans are transforming into retirement destinations as a way to offer employees diversification tools and, in many cases, lower fees than rolling into a retail account. We offer some of their tips below. 

Tips for success

Use “auto” features

Auto-enrollment and auto-escalation can lift savings rates. 

Simplify the menu

Simplified plan investment menus allow for more focused participant engagement.

Find creative ways to engage

In recent years, plan sponsors have discovered inventive ways to encourage and engage with participants. Some work with their recordkeeper to "nudge" participants toward saving more for retirement. 

Address savings shortfalls

Consider a stretch match, where the company match increases if the participant saves more.

Create a retirement destination

Allow rollovers from other DB and DC plans, and provide the ability to roll cash balance investments into the DC plan to help retirees stay in the plan. Consider offering retirees a managed payout option, which may be easier to understand and implement than annuities for most retirees. Evaluate and implement retirement income solutions to help participants obtain a partial income guarantee.

Convince the committee

Work closely with your committees to adopt some of these changes that may help you retain and attract the best employees.

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