45% of plan sponsors look to add emergency savings feature – MFS survey
Jan 31, 2024
Nearly half of plan sponsors plan to add emergency savings
features to their retirement savings plans, according to MFS' 2024 Retirement
Outlook report released Jan. 17.
Almost 1 in 4 (23%) plan to allow participants to take a $1,000
distribution directly from their retirement accounts once every three years
without being subject to a distribution tax, as permitted under the SECURE 2.0
Act of 2022. Another 22% expect to add separate in-plan emergency savings
accounts from which participants will be able to withdraw up to $2,500.
"I am personally surprised that the number is that
high," said Jeri Savage, retirement lead strategist at MFS Investment Management,
referring to the combined 45% of plan sponsors that indicated wanting to add
some type of emergency savings feature. "It's wonderful if that bears
itself out."
A healthy slice of plan sponsors is also looking to match
student loan repayments, the second most popular optional provision under
SECURE 2.0 Act.
More than 1 in 10 (16%) expect to make matching contributions
for student loan payments, meaning participants not contributing to their
retirement accounts will now be eligible for a match if they're paying back
their student debt.
If plan sponsors were unconstrained by budgets and resources,
however, they would more readily offer student loan matching than emergency
savings vehicles, according to the MFS' outlook report.
The 16% planning to match student loan payments would jump to
57% were they not limited by budget or resource constraints.
Student loan matching is onerous to administer and has a cost
associated with it, Savage said.
There's
a cost for the employer not currently making matches for participants not
contributing to their retirement accounts, she said.
Overall,
plan sponsors were hugely troubled by the changing regulatory and legislative
environment, rating it as the greatest issue that keeps them up at night. More
than half (55%) said the changing regulatory and legislation landscape was
among their three biggest worries, more so than litigation risk (44%), plan administration
burdens (43%) and in-plan retirement income solutions (41%).
"It's
hard to have a comprehensive plan design in place if the rules of the road are
constantly changing," Savage said.
Apart
from implementing mandatory and optional SECURE 2.0 provisions, plan sponsors
are keeping their eye on the highly controversial Retirement Security Rule
proposed by the Department of Labor in late 2023. The rule would update the
definition of investment fiduciary advice.
"The
onus is on the plan sponsors to evaluate their different service providers
because their service providers are going to be impacted under the retirement
security rule," Savage said, adding that the industry expects the rule to
change the way that business is done if it is passed.
"I
guess it's a little too early to speculate what the final rule will look
like," she said.
The
report is based on a survey of 141 plan sponsors conducted in September and
October and includes information drawn from a survey of 1,000 U.S. adults
conducted between March 22 and April 6.
Source: Pension & Investments
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