This month as calls from retirement plan participants and
website visits have increased, recordkeepers are noting changes, some of which
are related to job losses, employment trends and the economic dislocations as a
result of the ongoing COVID-19 pandemic.
Consistent with previous years, in January, retirement plan
participants are reassessing their finances by reviewing the entire retirement
readiness picture, says Rachel Weker, senior retirement manager at T. Rowe
Price.
“We definitely see that pattern of behavior year-over-year,”
she says. “At the beginning of the year, as people are reassessing their
financial situations, we see volumes increase the day after [the] Martin Luther
King Jr. [holiday]. Historically there is a more significant jump than you
typically see coming off of the weekend.”
T. Rowe Price figures for call volume increases show that
calls this year spiked again in January and were consistent with prior years,
Weker adds.
“When we compare ‘22 volumes to ‘21 and ‘20 we don’t see any
volume discrepancies this year relative to the others,” she says. “The volumes
are consistent, but we are seeing that increase.”
The recordkeeper states that “it’s usual to see increased
activity the Tuesday after MLK weekend (up 60% compared to 20% increase after
typical weekend).”
Many participants’ top concerns did carry into 2022 from
previous years. For example, interest in locating tax forms and information,
consumption of content on investing and use of T. Rowe Price’s paycheck impact
calculator continued.
The firm’s January figures show that its paycheck impact
calculator accounted for 50% of all tool usage in January to date compared to
the typical usage of 30%. Additionally, overall tool and calculator usage
overall is up relative to last January.
Voya also experienced a spike in participant calls and
website activity this month, says Amy Vaillancourt, senior vice president for
Workplace Solutions and Experience at Voya.
Historically January is a time of very high engagement,”
Vaillancourt says. “We saw very high engagement from our customers this week
already, and we attribute that to things like checking their statements,
getting ready to plan for taxes and questions on saving and financial
wellness.”
Voya did not provide figures for January call center volumes
or website visits.
Changing Contribution Rates
T. Rowe Price experienced an uptick in participants changing
contribution rates and a slight increase in retirement savings withdrawals.
For example, there was a 1 percentage point increase this
year for making changes to contribution rates compared to 2021—from 3% to 4% of
visits taking this action—among T. Rower Price plan sponsor participants. The
increase in volume of withdrawals relative to last year was .7% in 2022
compared to 5% last year.
Weker says additional analysis is needed to determine
whether, in aggregate, participants have increased or decreased contribution
amounts.
The increased activity might be an extended economic shock
and COVID-19 dislocation hangover, including job loss, but data would need to
be studied further to establish any linkages, Weker explains.
The 2020 Coronavirus Aid, Relief, and Economic Security
(CARES) Act and economic stimulus bill—in response to the economic fallout of
the COVID-19 pandemic—provided provisions for expanded distribution options and
favorable tax treatment for up to $100,000 of coronavirus-related distributions
(CRDs) from eligible retirement plans. The bill also increased the limit on the
amount a plan participant could borrow from an eligible retirement plan.
“I don’t have any data to support this hypothesis, but we
know some people took money out of their plan with a [CRD], and we know that
people are not paying them back,” Weker says. “But are people compensating for
that leakage by increasing their contributions more than they would have in the
past? That’s something we need to do more analysis on, but I would be
interested to better understand how related that is to the last couple of
years.”
Changing Focus
Participants are consuming different content than earlier in
the pandemic, Weker says.
“Earlier on in the pandemic, there was a pretty dramatic
shift to content related to more financial wellness topics and more near-term
focus like debt management or budgeting,” she explains. “What we’re currently
seeing is a shift back to more retirement planning, retirement saving content,
more of a long-term focus and that could be reflective of where people are
along the journey as we move through the COVID crisis and people are able to
start looking more towards the future at this point.”
Personalized education to tackle a participant’s specific
challenges, and follow-on behavioral nudges with resources and education is
critical to T. Rowe Price further supporting its plan sponsors, Weker adds. For
example, a participant who has a lower than optimal amount of retirement savings
for their age and income will receive follow up tailored messages.
“We have continued to build out our personalized
capabilities to build on those behaviors that they might have taken in the past
about the data we know about them: their savings rate, plan, design, what their
match formula might be, and we’re able to use that information in order to
identify next best steps,” she says.
Plan participants also receive behavioral prompts urging
action.
“Can you nudge them to increase their contribution rate,
reconsider their asset allocation, maybe update their beneficiary information?
That’s a primary way that the record keepers can work with plan sponsors and
advisers because we have a line of sight into an individual’s financial
situation, such that we can provide that really compelling information to help
them appreciate the long-term benefit of those behavioral changes today,” Weker
says.
She adds, “Participants might get a message saying, ‘You
might want to consider increasing your savings rate because you’re [deferring]
a little less than [what is recommended].’ And we provide a link to that
calculator so participants can understand whether they can afford to go up by
1% or 2%?”
Voya is also using this period of high participant engage to
devote resources to personalized communications aimed to help plan sponsors
address participant concerns and retirement readiness.
“We watch which topics are of interest to people, and we’ll
cater these to the time of year,” Vaillancourt says. “Things like budgeting and
debt management are examples of what we would address in January.”
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