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It’s time to talk to workers about retirement benefits

The market volatility stemming from the COVID-19 outbreak raises fresh concerns for company retirement plan sponsors and HR professionals. There is an increased urgency for companies to provide employees and retirement plan participants with the education and tools needed to maintain their investments and avoid making rash decisions.

Most participants don’t have significant investment backgrounds and, in times like these, it’s human nature to let emotions take over these decisions.

With the stock market down substantially, participants with exposure to equities are likely looking at losses on their statements. The magnitude of their loss will be driven by their allocation, including the amount they have in the stock market and the percent of their portfolio that is invested there.

So, how can retirement plan sponsors support plan participants right now? Here are a few ways that employers can work with their retirement plan provider and adviser to provide resources and help participants through the latest market swings.

Provide consistent, relevant messages
In times of extreme market volatility, providers should be communicating that participants should stay the course, avoid panicking, keep contributing and make sure that their investments align with their risk tolerance. Messages should be shared in a variety of ways to ensure they reach all participants, including through email, on the plan website and by mail if possible.

There is a time and place for targeted messages based on employee demographics, but this is a time for clear, concise and consistent messages. It is also a good time to evaluate scheduled emails to see if they are relevant to participants right now. I worked with a client recently who had a scheduled message to discourage loan use in plans. While that’s generally a good message, at this time it could be considered insensitive because some people may be out of work.

Educate employees about investment risks & market timing
While it’s important providers communicate with your participants about their retirement plans and investment risk all of the time, there is more urgency to discuss these issues right now because of the market decline. It’s important that plan participants stay educated so that they don’t make rash decisions.

Participants should be invested appropriately with an allocation based on their age and unique situation and goals. Individuals who are spooked by the market swings may want to sell out of the market completely, but that could have a significant, long-term impact on their investments. Selling now would solidify any losses they have and make reaching their retirement goals even more difficult.

Often, the stock market rebounds significantly right after hitting bottom, so if participants sell when the market is down, they are likely to miss out on a significant market upswing.

Designate your provider as the point of contact
Participants, particularly those nearing retirement, are likely to have questions about their investments and how the recent market drop will impact their retirement goals. It’s important that plan participants know who to reach out to with these questions.

Plan sponsors should be careful that they do not provide investment advice directly, which can create liability concerns. Instead, they should rely on service providers and make sure that participants have an easy way to reach out to providers with questions. In the short term, this is the best option for support.

Following the Great Recession in 2008-09, many participants near retirement felt that they couldn’t retire as early as planned and needed to work longer to make up for losses in their retirement plan. Losses from the current downturn could have a similar impact on participants who are near retirement today.

As employers continue to communicate a barrage of immediate changes, including new remote work policies, operations protocols and business priorities, it’s critical that they prioritize communication about company-sponsored retirement plans. This will help employees feel supported and manage investment risk and, ideally, allow participants to retire when they want to and allow the company to continue to bring new people on board.

Tara Mashack-Behney, president of Conrad Siegel Investment Advisors Inc. – Submitted photo

Tara Mashack-Behney is partner and president of Conrad Siegel’s Investment Advisory Services. Tara oversees the firm’s investment consulting for all types of retirement plans including defined benefit pension plans and defined contribution retirement plans.

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