Communicating Retirement Income Options to Your Participants - An Interview with Diana Winalski
Since launching retirement income solutions and education campaigns within your organization, has the uptake rate among your participants been within your expectation? Has the pandemic last year impacted interest in retirement income solutions at all?
We launched our enhanced retirement income program in early 2018 with the addition of a Long Bond Fund to be used in our Managed Accounts with Income + program, coupled with a new, out-of-plan annuity platform, the Hueler Income Solutions program. At the beginning of 2021 we began offering the Managed Accounts with Income + program to the entire savings plan population (previously it was limited to those aged 50 and older). We held a print mail campaign for those individuals that became eligible for the program, which was very well-received. As for the out-of-plan annuity program, we deliberately positioned the annuity platform as a company-wide benefit versus a 401(k) plan benefit. All employees can access it via links to Hueler’s separate annuity platform on both the IP benefits portal and the IP Savings Plan website at Empower. Our employees can access the Hueler calculator/tool and simply enter data based on questions about whether they want a certain monthly income in retirement or if they want a portion of money to be annuitized. Since launch, we’ve had hundreds of inquiries regarding the Hueler annuity offering, but no annuity sales yet. However, that’s not unexpected, since annuities can be complex and it may take time for employees to understand the products and to determine what’s best for them as they approach retirement.
In 2020, in order to further educate our employees, I worked closely with our Financial Wellness vendor and educated them on the Hueler Income Solution offering as well as our overall retirement income program. This was a critical step in educating this vendor that has direct access to our employees when they are seeking help and assistance - whether it be retirement planning, setting a budget or developing an emergency fund. I am hopeful that when our participants meet with the Financial Wellness representative the conversation surrounding retirement income will come up and the representatives will be equipped to discuss this out-of-plan annuity option.
In your view, what has been the most effective way to communicate with your participants on the importance of retirement income? What methods have you been employing and what channels are you looking towards?
When a participant logs into the Empower recordkeeping site, there is a Lifetime Income Score tool on the plan website, which projects a “score” that represents an estimate of the percentage of current income an individual might need to replace from savings in order to fund retirement expenses. The Lifetime Income Score looks at projected income in retirement based on age, asset allocation, and deferrals. This score shows how an employee’s retirement assets will convert into a 75% to 80% income replacement rate. The score gives the participant a sense of where they are falling short (if they are falling short) so that they’re able to make changes to either their retirement age, saving rates, or asset allocation. After looking at the Lifetime Income Score, one-third of individuals make changes to these inputs (savings rates, asset allocation, and retirement date). It really is a teachable moment for any participant who logs in and interacts with this tool.
Additionally, at the beginning of 2021, we began using an Empower service called ‘Retirement Solutions Group (RSG)’ which allows our participants to speak with a representative regarding detailed questions on their retirement assets. The service is offered to our participants at no cost and addresses questions surrounding an investment review/update, encourages the participant to increase their deferral rate to take advantage of the full company match, guides the participant to Managed Accounts with Income + if they would like to enroll in that program, or helps to consolidate their assets in the IP Savings Plan. Notably, we encourage rollover assets to the plan in order to make it easier for people to manage their collective retirement assets. RSG will also play an important role in keeping retirement assets in the plan once they retire from IP, by educating them on the benefits of staying in the plan versus going to a third party IRA provider. The International Paper Savings Plan offers great flexibility for our participants and has many of the features and products offered in third party IRAs.
Are there any differences in your approach towards communicating retirement income solutions to different age cohorts? How do you engage with near-retirement participants who might not have saved enough in their careers on the topic of retirement income?
Until the end of 2018, salaried employees at International Paper had the benefit of being in an accruing pension plan, while new salaried employees hired after June 2004 rely exclusively on our 401K plan for retirement. It is very important to get those participants to save as much as they can, to obtain the full company match, and to remain in a diversified portfolio throughout their career at IP. The hourly population continues to have an open and accruing pension plan. In terms of communicating with near-retirement participants, our Financial Wellness vendor, Managed Accounts with Income +, and now RSG will play important roles in educating participants that are beginning to put the pieces together surrounding their retirement income plan. If a participant hasn’t saved enough for retirement, they will be encouraged to save more, if they can afford to.
I think an important benefit that many participants overlook is the benefit of an annuity from Social Security, sponsored by the U.S. Government. Many people draw upon their Social Security benefit immediately upon reaching the eligible age of 62. However, if one can defer until age 70 the pay-off is an additional 8% more income every year you defer. The Managed Accounts with Income + advisors help educate participants on this potential additional income offering strategies of drawing on other sources of retirement assets like 401(k)s or an IRAs to help bridge the income gap between ages 62 and 70 to maximize their Social Security payout.
Looking back on your experiences with retirement income solutions of all shapes and sizes, what would be your biggest piece of advice for any plan sponsor who has not yet implemented a live solution?
My biggest piece of advice for plan sponsors who have not yet implemented a retirement income solution is to offer something to your employees as a spend-down program. It could be Managed Accounts with Income + as a stand-alone product. Or, an out-of-plan annuity program, like a Hueler Income Solutions product. I feel it is important to offer participants something and not to get caught up with finding the ‘perfect solution’. There is no perfect solution today. Investment managers continue to bring new products to market; however, what IP put into place is solution that works for our plan participants today. If a better product comes along, we will conduct due diligence and learn more, and if it is superior to what we currently offer our participants we will put that into place.