Data indicates that the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 is having an impact. The Plan Sponsor Council of America’s 64th Annual Survey reveals positive trends related to retirement plan design features—and participation levels. A record number of employees are eligible for and participating in 401k plans.
Increased Participation and New Plan Design Features
The SECURE Act aimed to expand participation in employer-sponsored retirement plans, and it seems that’s exactly what happened in 2020. As the National Association of Plan Advisors (NAPA) reports: “More employees than ever are eligible to participate in plans—nearly 93%—likely aided by the SECURE Act provisions allowing long-term part-time employees to participate. Nearly three-fourths of plans now allow salaried part-time employees to participate and nearly 70% allow hourly part-time employees to do so.” Changes to plan design are also underway—and getting a strong response from participants. NAPA points out these impactful features:
- Roth—Roth after-tax contributions are now permitted in 86.3% of plans, including 91.3% of large plans.
- Automatic Enrollment—The use of automatic enrollment and automatic escalation made modest gains again this year—62.0% of plans now use an automatic enrollment feature. And for the first time, the most common default deferral rate is now 6% of pay (32.9%) rather than the 3% of pay that has been the norm since 2006 (29.0% of plans).
- Investment Options—There was an increase in the number of investment options offered to participants for the first time in more than 10 years—on average, 21 funds are now included in plan lineups.
- Investment Advice—Forty percent of participants took advantage of advice when it was offered in 2020, up from a quarter of participants during the last few years.
- Technology—The use of webinars to provide plan education increased from a third of organizations in 2019 to more than half (53.7%) last year. The use of mobile apps has increased by 80% in the last five years, with 64.9% now using apps.
Designing for 2022?
Hit the ground running by getting the basics checked off your list. Here’s an easy one: it remains a Department of Labor (DOL) requirement for your retirement plan to have a current ERISA Bond—and this must be issued from a U.S. Treasury listed business, such as Colonial Surety Company. As a national leader in the field, Colonial can help you with the required ERISA Bond for the plan —and much more. We offer affordable fiduciary and cyber liability insurance to protect plan sponsors in these challenging times. Colonial makes it easy, fast, and direct to quote and purchase your coverage package online, from anywhere. Choose Your Affordable Package Here Now.
Shifting: Retirement Education
Another retirement plan shift underway involves a more holistic, and digitally powered approach to educating participants. These changes are attributed to the disruption of the pandemic. NAPA reports:
For the first time, the primary reason for providing retirement education was to increase employees’ overall financial literacy (77.1% of plans), supplanting the traditional focuses of increasing appreciation for the plan and boosting participation. The pandemic seems to have accelerated the shift toward a more holistic approach to retirement and financial education. At the same time, the remote work environment challenged traditional administration and education methods, forcing a greater reliance on technology. The use of email, mobile apps and webinars to provide plan education jumped significantly, and two-thirds of organizations are now using mobile technology to provide plan access and transactions.
Ensuring that participants are receiving plenty of clear, informative and digitally accessible educational materials from service providers remains high on the list for plan sponsors in the year ahead. One negative current trend that plan sponsors may also try to turn around is the decline in company contributions. The employer match of course makes a big difference to retirement plan savings and even modest percentage increases in 2022 could propel further progress.
As you resolve to make 2022 a great year for the company retirement plan, make it a great year for yourself too. With Colonial it only takes a few minutes to put a three point protection plan in place. We offer affordability, locked in multi-year rates and installment payment options. With Colonial’s convenient package, the annual premium is less that what you would pay for even one hour with an expert ERISA lawyer—and we even include cyber liabiity insurance. Select your package in minutes and receive:
- The ERISA bond is required to protect the assets of the retirement plan from theft.
- Fiduciary Liability insurance to protect you and your assets from personal liability.
- Cyber Liability insurance to safeguard your company and plan from covered losses and expenses in the event of a cyber breach.
Colonial Surety Company is rated “A Excellent” by A.M. Best Company, U.S. Treasury listed and in business all across the country. Serving customers since 1930, we are the trusted source for the pension industry to secure legally required ERISA bonds, fiduciary liability insurance and cyber-liability insurance. With a Trustscore of 4.8, we help safeguard plan sponsors, pension professionals and financial advisors — and keep their businesses compliant — with pain-free, efficient, and friendly service every time.