The start of a new year brings with it reflection on the year that has passed and anticipation for the changes that may be coming. For retirement plans, this often means a look at new federal regulations, new technology, and new industry trends. The annual contribution limit to 401(k) plans is holding steady at $18,000 and employees age 50 and older able to save an additional $6,000. But, here are five ways your retirement plan may change in 2017.
1. Focus will start to shift to financial wellness
By now, it’s common knowledge that many Americans aren’t adequately prepared for retirement. But rising costs in healthcare, student loan debt, and other areas make it difficult to plan for retirement expenses when people are struggling to pay for their current expenses. The use of creative tools and incentives may serve as ways to help improve overall financial wellness.
Beyond just offering access to educational programs for employees, covering topics such as how to set and stick to a budget or how to manage and pay down existing debt, employers may offer an additional incentive like cash or gift cards to entice their employees to participate in financial wellness programs.
2. Financial advice must now be in your best interest
Effective in April and phased in through the remainder of 2017, all financial professionals who provide investment advice to a retirement plan will be considered fiduciaries, and bound by the legal and ethical standards set forth in ERISA. This means that the funds financial professionals recommend must be in the plan’s best interest, instead of funds that would be most profitable for the advisor.
3. You may see a shift in investment options
Gone are the days of dozens of investment options in retirement plans. Instead, plan sponsors are now choosing to streamline their investment lineups to make investing decisions less complex. There’s also a greater emphasis being placed on investment products that offer target date or risk-based options, taking much of the guesswork out of choosing allocations.
The development of robo-advisors for employer-sponsored plans (subscription required) will also help participants with portfolio allocation. These programs use complex algorithms to deliver investment solutions that were previously only available in the retail investment market, but are now making their way to employer-sponsored plans, offering personalized investment advice at lower costs than traditional human advisors.
4. You may be enrolled in your plan even if you don’t take action yourself
Research has shown that when new hires are automatically enrolled in their 401(k) plans, 91% participated, compared with only 42% voluntary participation in plans that don’t offer this feature. Many employers have already taken advantage of this type of plan design, and more are considering adding this feature to their plans. If a plan already implements auto-enroll, adding an annual auto-increase feature may be another way to improve overall retirement savings.
There has also been an increased interest in reenrollment, where employees hired prior to the adoption of the auto-enrollment provision are automatically increased to match the new auto-enrollment level. Any combination of auto-enrollment, auto-increase, or reenrollment can be useful in encouraging retirement savings for participants who may not otherwise contribute.
5. Your plan may be going mobile
Most employer-sponsored retirement plans have some sort of online portal where employees can check balances, view performance, and initiate transactions. However, people are often on the go and may not have access to a laptop or computer—but most usually have access to a smartphone. Development and enhancement of mobile apps will be a focus of many retirement plan providers as the demand for mobile access increases.
There will also be an increased focus on offering a comprehensive overview of retirement readiness. Many retirement plan providers will continue working on offering tools that allow participants to link external accounts for a big-picture view of their overall financial positions.