Benartzi: 7 Tips to Get Retirement Plans Back on Track After COVID-19

1. Boosting the auto-enrollment deferral rate to 7%.

Prior research found it was possible to significantly increase suggested savings rates without increasing the number of participants opting out of a retirement plan, according to Voya. Suggesting rates between 7% and 10% didn't result in lower enrollment when compared to a 6% control rate. However, "by raising the auto-enrollment deferral rates, employers can make it easier for workers to build up their savings, even if they occasionally are forced to make hardship withdrawals," according to Voya.

2. Boosting the escalator cap to 15%.

Recent regulatory changes in the Setting Every Community Up for Retirement Enhancement (Secure) Act encouraged retirement plans to raise the cap on auto-escalated savings rates from 10% to 15%, enabling employees to save at a higher level when needed, Voya noted. "This is especially important for those workers who have made hardship withdrawals as they are likely to need higher savings rates to achieve financial security," according to the firm.

3. Considering the stretch match.

In a typical stretch match, employers lower their match rate while boosting their match cap. Instead of offering 50 cents on the dollar up to 6% of pay, employers could offer 25 cents up to 10% or 15% of pay, Voya said, calling that a "timely solution as it enables employers to shift a portion of their matching costs into the future, after the economy recovers."

The other four tips are: Boosting the annual auto-escalation rate to 2%; enrolling and re-enrolling all employees holistically; rethinking the online enrollment architecture; and considering the fixed dollar match.

"There's no denying that COVID-19 has created financial challenges for American workers and companies alike, but as a result, employees are seeking greater support from their employers in helping them to address their health and wealth needs," according to Charlie Nelson, CEO of Retirement and Employee Benefits for Voya Financial.

"While many individuals have had no choice but to withdraw funds from their retirement savings, there are many opportunities for employers to implement solutions that can help individuals get back on track, starting with small changes to the design of their retirement plan program," he said in announcing the release of the white paper.