Employer Attention Divided Among Diverse Challenges During Pandemic

To help on the financial security side, many employers are encouraging their employees to continue to view their 401(k) as a long-term investment meant for retirement.

As the world continues to cope with the impacts of COVID-19, workplace safety joins retirement security and financial wellness as top priorities employers say they are facing, according to the 2020 Retirement Plan Trends Study conducted by institutional fiduciary Pentegra.

Employers reported a challenging environment amid the global pandemic, including concerns about budget constraints, staff reductions, decreased revenues, cost controls, competitive pressures, market and economic uncertainty, and keeping employees safe.

When asked what they are most concerned about, 23% of employers said getting back to some level of normalcy was their top priority, followed by providing strong service and retaining customers (17.86%), attracting new business and generating sales (5.36%), and controlling and reducing expenses (3.57%). Half of those surveyed said all of those challenges are priorities.

But normal looks different to most companies these days and likely will continue to look different for some time. Nearly 29% of employers said they have modified schedules or moved to remote work arrangements, 16% have suspended services or adjusted hours of operation, another 16% have had to adjust how they communicate with employees, and 2% said they have furloughed employees. Thirty-eight percent of respondents said they have taken more than one or even all of these measures to cope with the crisis.

Employees face their own set of challenges related to the pandemic. Nearly half of employers said concerns about physical safety seem to be their employees’ top concern, followed by work/life balance issues (33.93%), working in a remote environment (10.71%), and economic uncertainty and volatility (10.71%).

To help on the financial security side, many employers are encouraging their employees to continue to view their 401(k) as a long-term investment meant for retirement. About 13% are telling their employees not to take drastic actions, and 9% are encouraging employees to continue to contribute to retirement plans, even if at a lower rate. However, 15% of employers said they aren’t sure what to tell employees, and about 21% said they would like to be able to provide their employees with more financial and investment education.

With employees worried about financial and retirement security and the impact of the pandemic, some employers are being proactive by encouraging employees to contribute more or take advantage of dollar-cost averaging, and encouraging them to avoid taking distributions.

“Throughout our conversations, clients shared employee concerns about emergency funds and saving for retirement,” noted Richard Rausser, Senior Vice President of Client Services at Pentegra. “Some expect that the crisis may have a positive long-term impact on saving and spending habits, with employees more aware of the importance of saving for retirement.”

However, more than half of respondents (53.7%) said they are not spending as much time managing details of their firm’s retirement plan because they are focusing more on getting their business back to normal, and about 40% said they aren’t able to help their employees overcome concerns about retirement security for the same reason. As such, many respondents say they are outsourcing the fiduciary duties related to administering their retirement plans.

“The current environment has really highlighted the importance of having a fiduciary partner,” said Rausser. “Our study illustrated how having a professional on board during this time has been a source of relief for sponsors. Now more than ever, our clients shared how much they value having fiduciary assistance to help navigate these unprecedented circumstances. We expect that trend to continue as businesses work to get back to normal.”

While many employers say COVID-19 has divided their attention and left them less focused on retirement plan management, most are still taking steps to make sure their plans are successful. Forty-three percent of survey respondents said they evaluate their plan regularly, while 25% they rely on professional help to manage their plans.

The study, which was conducted between June 1 and September 30, examined the top challenges businesses are facing in the COVID-19 era, and what kinds of assistance employers and employees alike are seeking for retirement plans. More than 250 employers with retirement plan assets between $1 million and $175 million participated in the survey.

Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM’s Retirement Advisor magazine and LifeHealthPro online channel. She also was a reporter for Business Insurance magazine covering workers compensation topics. Kristen graduated from the University of Missouri with a degree in journalism.