Behavioral Research for Retirement Plans To Act On


Facing the financial challenges set in motion by the pandemic has been hard on many workers and employers. In response, experts recommend strategic action to help with retirement saving.

Toward Financial Security: Step By Step

Behavioral economist Dr. Schlomo Benartzi encourages retirement plan leaders to adjust plan designs so that employees can incorporate saving into their routines as they steer forward. Based at the University of California (UCLA) and advising the Voya Behavioral Finance Institute for Innovation, Benartzi reminds us:

The current crisis is also an opportunity to improve plan design and boost the financial security of American workers….Every worker deserves to benefit from these insights, which is why plan sponsors should apply these design changes holistically—and include both full- and part-time, and new and existing employees.

 From Research To Action: Three Ideas

 With workers and companies confronting financial challenges, retirement planning is of course challenging. Yet, in the aftermath of loss, it is critically important to get more savings going. Experts advise that small changes to retirement plans, informed by behavioral research, can really make a difference. Here are three actions suggested by Dr. Benzarti, as reported in 401k Specialist.

Consider the stretch match: In a typical stretch match, employers reduce their match rate while increasing their match cap. For example, instead of offering 50 cents on the dollar up to 6% of pay, employers could offer 25 cents up to 10% or 15% of pay—a timely solution as it enables employers to shift a portion of their matching costs into the future after the economy recovers.

Increase auto-enrollment deferral rates to 7%: Prior research has found it is possible to significantly increase suggested savings rates without increasing the number of participants opting out of the retirement plan. Specifically, suggesting rates between 7% and 10% did not result in lower enrollment….By raising the auto-enrollment deferral rates, employers can make it easier for workers to build up their savings, even if they occasionally are forced to make hardship withdrawals.

 Boost the escalator cap to 15%: Recent regulatory changes in the SECURE Act encourage retirement plans to raise the cap on auto-escalated savings rates from 10% to 15%, allowing workers to save at a higher level when necessary. This is especially important for those workers who have made hardship withdrawals as they are likely to need higher savings rates to achieve financial security.

 Securing Protection: Three Point Plan

 With everyone working so hard to save—and the escalating realities of fiduciary and cyber breaches—be sure to step up risk management efforts too.

Keep in mind, as a plan sponsor, you are a fiduciary, and could be personally named in a lawsuit if a plan participant sues for a fiduciary breach—including breaches associated with cybersecurity. That’s why Colonial Surety Company provides affordable, comprehensive coverage packages for retirement plan sponsors. Just select a package and receive a three point solution.

  1. The ERISA bond required to protect the assets of the retirement plan from theft; 
  2. Cyber Liability coverage to safeguard your company and plan from covered losses and expenses in the event of a cyber breach; and,
  3. Fiduciary Liability coverage to protect you and your assets from personal liability.

Colonial Surety Company provides user-friendly, digital, and direct service. You can easily and quickly purchase your bonds and related insurance coverage online—and instantly print or e-file them from your desktop—or anywhere.

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 As a plan sponsor, understand this: the ERISA bond required for the retirement plan does not cover you as a fiduciary.

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