Wide gaps exist between retirement plans, employee needs: Transamerica

Corporate leaders might want to consider checking their benefits packages as a new study shows extensive gaps between employers' retirement offerings and workers’ needs.

According to a report by nonprofit Transamerica Institute and its Transamerica Center for Retirement Studies, almost 7 in 10 (69%) employers cite one or more workforce-related issues as major concerns for their company’s leadership, and more than six in 10 (61%) reevaluated their health, retirement, and other benefit offerings in 2022.

The new study, "Stepping Into the Future: Employers, Workers, and the Multigenerational Workforce,"” is based on a survey of 1,800 for-profit U.S. employers including small, medium and large companies.

Catherine Collinson, CEO and president of Transamerica Institute and TCRS, said employers are grappling with workforce issues ranging from attracting and retaining talent to productivity, flexibility, and return-to-work policies.

“In today’s rapidly evolving environment, many are reevaluating their business practices and benefit offerings, but the question is whether they are in sync with employees’ needs,” Collinson said in a statement..

Based on the research findings, employers could address disconnects with their employees through a number of measures. For example, when it comes to bridging work-life balance, the study shows more than nine in 10 employers (96%) believe they are helpful in supporting their employees’ work-life balance, while only 75% of workers feel their employers are helpful in this way.

Meanwhile, on the issue of professional development, the survey showed 88% of employers feel responsible for helping their employees keep their job skills up to date. However, only 49% of workers indicate they are keeping their job skills-up-to date so they can work as long as they want and need, the study said.

The report also showed a mismatch between the percentage of workers who value health insurance benefits compared with employers’ offering them. The study said 95% of workers see health insurance as an important benefit, but only 63% of employers offer the coverage to their employees.

Along the same lines, employer-sponsored retirement plans, including 401(k)s and similar plans, have proven to be the most effective way to promote long-term savings among workers. Nevertheless, millions of workers don't have access to these benefits, especially those working for small companies.

“Thankfully, the SECURE 2.0 Act of 2022 makes it easier and more affordable for employers to establish new plans," Collinson said. "It also provides new ways for employers to enhance their plans and for workers to increase their retirement savings.”

The survey findings, which outline employers’ retirement benefit offerings prior to the passage of SECURE 2.0, show only 58% of companies, mostly large and midsize, offer a 401(k) or similar retirement plan to their employees.

That said, more may offer a retirement plan in the near future. According to the study, among companies that do not offer a 401(k) or similar plan, 42% say they're likely to begin doing so in the next two years, and 54% say they would consider joining a pooled plan arrangement such as a multiple employer plan, pooled employer plan or group of plans.

One way to make it more convenient for workers to save is automatic enrollment because it eliminates the upfront paperwork. Unfortunately, the study showed only 15% of plan sponsors have adopted automatic enrollment. 

Paul Lee, wealth manager at Kingswood US, says the growing challenge that companies face is to attract and retain quality employees with competitive compensation and benefits packages, while maximizing shareholder value and revenue growth. 

“In the past, employees would start their career with one company, advance their career, then ultimately retire with that company," he said. "That employee was satisfied with a modest compensation and benefits package in exchange for peace of mind with long-term employment. 

“Fast forward to the present, and people these days are looking for the next best thing. This is being engrained in us with the way we get and digest information faster than in the past," Lee said. "The positive of this mental shift is that business is faster than in the past, but now employers must work harder to attract and retain their workforce at a higher cost. Here's one solution: Smaller companies can be more competitive and fiscally prudent by joining a pooled plan arrangement that enhances their employee benefits package.”