Creating a Post-COVID-19 Gameplan for Your Retirement Plan
We were a little hesitant to use the term “Post-COVID-19″ in the title of this month’s newsletter. It’s not in our past. We’re still in the midst of the pandemic and many data points suggest some tough months ahead.
However, we do know that COVID-19 has shifted how most of us think, work, and communicate. As your organization conducts its business planning and strategy meetings relating to 2020, how will your organization adapt its retirement plan strategy? Here’s a gameplan for ensuring you – and your consultant – adapt the approach in 2021.
Step 1: Schedule that First Quarter Meeting. This seems like an obvious one. But more than ever before, it’s important to not only schedule the meeting early, but also ensure you receive clear commitment regarding your committee members’ availability for the meeting. We need their buy in and engagement for this meeting.
Step 2: Talk with Your Non-Committee Member Leaders/Executives in Advance. This is a subtle – but important – step. Prior to your first quarter meeting, identify your organizational leaders who are not on the plan committee. Take some time to get their input. Someone in HR? Check in on how benefits open enrollment worked and whether they learned anything from more virtual communication. One of the business owners? Check in on his or her support for efforts to improve financial wellness. Allow your organization’s business and people realities to influence how the retirement plan adapts.
Step 3: Spend Time on the Year-End Recordkeeper Summary. The recordkeeper summaries typically don’t show revolutionary changes from quarter to quarter. However, the first quarter of 2021 provides a great opportunity to look back at how things changed – or perhaps didn’t change – year over year. Some might be surprised to see that participants didn’t make dramatic changes to their participation and savings decisions during 2020. Others, particularly those whose companies encountered tough economic conditions and experienced significant employee count reductions, can review how the dust settled. To the extent your plan offered some or all of the CARES Act provisions, it will be insightful to understand how many participants took advantage of those features.
Step 4: Spend Time on the “Do-It-For-Me” Strategies. Over the last several years, most plans have experienced a shift toward a majority of the Plan’s assets being invested in “do-it-for-me” solutions, frequently a combination of age- and risk-based solutions. The first quarter investment review ought to focus on how those vehicles behaved throughout the ups and downs of 2020. How did the risk-based vehicles withstand the volatility? Did the age-based target date funds perform the way we’d expect them to perform in that environment?
Step 5: Create a 2021 Employee Communication and Education Plan. The prior steps involve a look back. Think about what we’ve gathered from the steps above: (1) a sense for how our organization is communicating with your employees; (2) an understanding of the organization’s commitment to financial wellness; and (3) data regarding participant and investment performance during a ridiculously challenging year.
Now it’s time to look ahead. It’s time to put that information to use as we solve for the big questions we are likely to face in 2021. How can we reach employees? How can we engage them? What have we learned about their short-term financial needs? Do they have ample short-term savings? What can we teach them about how the retirement plan’s investment strategies work? How can we ensure they keep their long-term savings strategies in place when they hit challenging times?
Closing Thoughts. Between now and first quarter meetings, we may encounter additional market volatility. Congress may agree upon a bill that further changes retirement plan rules. Although we continue to face a great degree of uncertainty, one issue appears relatively certain: your employees will look to you for retirement plan and financial wellness help throughout next year. We look forward to talking more about the development of a gameplan that will deliver what your employees demand and need.