Diversity Equity and Inclusion and its impact on Retirement Plans
Thankfully, your retirement plan is no stranger to reporting. From participation rates, deferral percentages, asset allocation mixes, benchmarking analysis, investment reviews and other slice and dice metrics, retirement plan information is often shared based on your plan’s specific numbers and peer group comparison.
However, those calculations seldom include the lens of Diversity, Equity and Inclusion (DEI). Now all that is changing.
Expanding the Scope
Nearly two—thirds of plan sponsors have noticed an increased demand for retirement plans to align with DEI efforts. So, now is a good time for employers and retirement plan committee members to revisit and re—evaluate how their 401(k) plans align with the workplace climate.
Four primary areas to review your workplace retirement plan DEI may include:
DEI is an essential part of a financial wellness program. A financial wellness program’s purpose is to help employees improve their overall financial situation. The best way to do this is by gaining an understanding of the differences that may exist between diversity groups (e.g. age, race, ethnicity, gender, physical abilities, sexual orientation, etc.), followed by viewing plan data to identify cohorts that could benefit from receiving additional resources. Sponsors can also use the data presented to look at demographic groups and see if they have different engagement levels in the plan.
One idea to address participation gaps is auto—enrollment. It is agnostic across all employees; it has been found that when auto—enrollment is implemented with Black, Latinx and White Americans, the participation rate remains 80% across the board. Interestingly, when given the same auto—enrollment default, everyone saves the same when they have access. This is one example of how employers can address a coverage issue and, if applicable, address a racial disparity within 401(k) plan participation.
Diversity can extend not only to different cultural groups but varying generations as well. As such, employers should offer financial education resources that appeal to the different learning preferences (and languages) of each cohort along with best way to communicate with them about retirement, all while working to improve experiences through effective DEI.
As the lifestyles and stages of employees evolve, so do their financial needs and priorities. For a retirement program to be successful, employers should take these changes into consideration.
One size doesn’t fit all. Plan sponsors should seek to employ a mix of communications — utilizing brochures, emails, videos, infographics, blog articles and online calculators — to get the message out to different demographics within the plan.
To get started with your DEI strategy, consider these best practices:
Using DEI to guide plan decisions can help ensure your company’s retirement plan is working to positively impact the different cohorts of your employees. DEI used wisely can increase the retirement engagement and security of all.