Plan Sponsor Outlook – 3rd Quarter 2023

According to a December 2022 report from the U.S. Government Accountability Office, women still earn an estimated 82 cents for every dollar men make. Not only does that mean women likely earn less in their lifetimes, they also have less income to put toward retirement. In addition, a new study by 401(k) platform Guideline found women report feeling more overwhelmed and less in control toward their retirement savings than men (48% vs. 27%). They were also likelier to experience feelings of frustration (31% vs. 21%), intimidation (30% vs. 18%) and confusion (22% vs. 9%). As a result, fewer women are saving for retirement than men (69% vs. 80%). In addition, 55% of men save more than 10% of their income, whereas only 36% of women claim the same. The survey also found that women are nearly twice as likely as men to self-identify as novice investors.

The survey points to fundamental plan features for employers to have in place to begin closing the gender gap: automatic features with a robust employer match, along with tools and resources to help improve financial wellness. Targeted educational campaigns that focus on boosting retirement savings literacy and confidence with the overall retirement planning process should also be considered. In addition, a recent LIMRA survey indicates that women who work with a financial professional are much more likely to complete several retirement planning tasks that are recommended to bolster retirement readiness.

Previously, the Internal Revenue Service permitted self-certification for hardship distributions, but it was the responsibility of the plan to obtain any records or evidence needed to prove compliance if the validity of the distribution was challenged. Therefore, some plan administrators and recordkeepers were hesitant to permit self-certification. Thanks to SECURE Act 2.0, for plan years beginning on or after December 29, 2022, plan administrators may rely on certification by a participant verifying that they have met the requirements for a 401(k) or 403(b) plan hardship distribution without this extra documentation. The employee’s written self-certification must state that circumstances for the hardship exist, the amount requested is not more than the amount required to satisfy the financial need, and the employee has no alternative means to satisfy such need. These changes are optional and are effective for calendar year plans now.

Employers have reevaluated their retirement plan designs with an eye toward making it easier for employees to join plans and start saving, according to new Vanguard Group data. For Vanguard recordkeeper plans, 72% of employers permitted employees to participate in the plan immediately, compared to 58% in 2012; 86% allowed for entry within three months of employment. For insight on additional potential plan design enhancements, check out Vanguard’s “The Changing Workforce Environment: How Employer Plans Can Help Attract and Retain Employees” (March 2023) at https://tinyurl.com/yvx8pb2m.