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Not-for-Profits Recognize Responsibility in Encouraging Positive Savings Behaviors

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Most not-for-profit organizations believe they have a responsibility to encourage their employees to save for retirement, but only 10.6 percent of those organizations are able to measure potential participant outcomes as part of their retirement plans.

According to a new survey of 403(b) plan sponsors from the Plan Sponsor Council of America (PSCA) and sponsored by the Principal Financial Group(R), 27.1 percent of plan sponsors feel they have a responsibility to encourage savings and are taking measures to do so, while another 25.8 percent acknowledged that same responsibility and know they need to do more to support positive savings behavior. More than a third of respondents (35.0 percent) reported they encourage their employees to save but don’t want to “force it,” and only 10.3 percent felt by offering a plan they fulfill their responsibility as an employer.

“It’s no surprise the majority of not-for-profit organizations recognize the important role they play in helping their employees prepare for retirement,” said Bob Benish, executive director of PSCA. “We continue to see 403(b) plan sponsors make progress in building better retirement programs, and encouragement and education are key factors in helping participants create positive outcomes.”

Just 10.6 percent of 403(b) plan sponsors are monitoring potential participant outcomes by providing their participants with access to modeling and income-stream projections offered through the plan service provider.

“When saving for retirement, it’s important to include a desired outcome or personalized goal within the process,” said Aaron Friedman, national tax-exempt practice leader at The Principal(R). “It’s encouraging to see some plans are already measuring potential participant outcomes, but we believe it’s something all plans should be doing to help participants know whether they’re on track for a more secure retirement.”

Automatic Enrollment
When asked whether they consider automatic enrollment as a way to improve retirement outcomes for participants, 47.9 percent of plan sponsors answered yes, while 27.9 percent said no and 24.2 percent were unsure. More than a quarter of respondents (27.5 percent) indicated they have an automatic enrollment feature built into their plan, and another 8.8 percent said participation in their plan is mandatory.

“Traditionally, not-for-profit organizations have been characterized as paternalistic toward their employees. Many provide very generous retirement savings plans, but simply having the benefit available doesn’t mean everyone takes advantage of it,” Friedman said. “That’s where automatic enrollment can be beneficial.”

Education and Financial Wellness
According to the survey, half the organizations (50.4 percent) are equally concerned about all employees saving enough for retirement, no matter their age. The next most concerning group is Millennials (18.1 percent), followed by Generation X (14.4 percent). Just 15.8 percent of respondents target their plan education materials to specific age segments.

But nearly a quarter of plan sponsors (23.2 percent) offer a holistic financial wellness program beyond the retirement plan, which could include education on health care, debt management, financial planning and saving for college. Another 20.3 percent plan to add a similar program in the future.

“It’s crucial to be able to see the whole picture when it comes to financial wellness,” Benish said. “I commend those plan sponsors already offering holistic financial wellness programs and think it’s a positive that so many more have plans to.”

PSCA’s Attitudes Towards Retirement Readiness in 403(b) Plans reflects responses from 381 not-for-profit organizations that currently sponsor a 403(b) plan. Full survey results are available here.

For more research, analysis and insights from The Principal(R), visit The Principal Knowledge Center and connect with us on Twitter.

About the Plan Sponsor Council of America
The Plan Sponsor Council of America (PSCA), a national, non-profit association of 1,200 companies and their six million employees, advocates increased retirement security through defined contribution programs to federal policymakers. PSCA makes practical assistance available to its members with plan design, administration, investment, compliance, and communication materials. PSCA, established in 1947, is based on the principle that “defined contribution partnership in the workplace fits today’s reality.” PSCA’s services are tailored to meet the needs of both large and small companies with members ranging in size from Fortune 100 firms to small, entrepreneurial businesses, and non-profit organizations. For more information, visit www.psca.org.

About the Principal Financial Group
The Principal Financial Group(R) (The Principal(R))1 is a global investment management leader offering retirement services, insurance solutions and asset management. The Principal offers businesses, individuals and institutional clients a wide range of financial products and services, including retirement, asset management and insurance through its diverse family of financial services companies. Founded in 1879 and a member of the FORTUNE 500(R), the Principal Financial Group has $513.5 billion in assets under management2 and serves some 19.5 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com.

Bob Benish and PSCA are not an affiliate of any company of the Principal Financial Group.

1 “The Principal Financial Group” and “The Principal” are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
2 As of Sept. 30, 2014.

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