LFG’s holistic strategy boosts DC plan contributions
By Thomas A. McCoy, CLU
“Participants engaging with
My Target have increased their salary deferral
rates by 37%—to an average of 12.7% of salary.”
Senior Vice President, Customer Experience, Marketing and Transformation
Lincoln Financial Group
An employee’s short-term financial needs are always getting in the way of retirement funding. How can a benefits plan sponsor continue to encourage employees to aggressively fund their defined contribution (DC) plans while also helping them with their everyday financial concerns?
“While our industry traditionally has emphasized tools for optimizing retirement outcomes, plan participants view their financial decisions more holistically,” says Sharon Scanlon, senior vice president, customer experience, marketing and transformation, at Lincoln Financial Group (LFG). “Many workers face tradeoffs between saving for the future and meeting immediate goals.”
LFG deals with this short-term/long-term needs dichotomy by offering plan participants user-friendly tools for dealing with both simultaneously. A worker who is using the company’s retirement plan website to project their progress toward retirement goals can, at the same time, access Lincoln WellnessPATH®, its online financial wellness solution for guidance on shorter-term objectives.
WellnessPATH is designed not only to be educational, but also actionable. It provides employees with the ability to set goals and track their management of monthly financial obligations and shorter-term savings needs. After completing a brief quiz, employees are given a personalized financial wellness score that is divided into four categories: spending, protection, debt and saving.
The financial wellness solutions cover a range of topics, including student loans, emergency savings, estate planning, property and casualty, mortgage support, pet insurance and mental health. WellnessPATH offers support online, in-person, over the phone or via video chat.
“The demand for holistic financial solutions is evident among both employers and participants,” says Scanlon.
“We consider in-plan annuities
to be crucial for participants, plan sponsors and the defined contribution industry.”
President, Retirement Plan Services
Lincoln Financial Group
On the retirement plan side, LFG maintains a strategy of putting personalized data and actionable tools in the hands of plan participants. The company enhanced its participant website two years ago, including a streamlined online enrollment process. Since then, it has seen a 24% increase in its average salary deferral rate for defined contribution plan participants; its average salary deferral rate for its DC plans is 8.9%.
A key to its personalized experience, Scanlon explains, is the site’s My Targetsm tool, which presents potential retirement income in real terms on each participant’s dashboard. “This interactive tool allows users to model individualized scenarios, including retirement year, returns, outside assets and Social Security. Participants engaging with My Target have increased their salary deferral rates by an average of 37%—to an average of 12.7% of salary.”
Another feature, Click2Contribute, simplifies the process for benefits plan participants to make changes in their retirement contribution amounts, reducing it to two clicks. Those who use this feature save 46% more for retirement, achieving an average savings deferral rate of 11.2%.
Despite its success in using technology to support retirement planning for plan participants, LFG recognizes that, for some, more person-to-person support is needed. The company employs retirement consultants (RCs) having an average of 18 years of experience and industry designations to meet with these plan participants—either online or in-person.
“We utilize plan data to pinpoint employee segments that benefit most from this personalized support and engage them proactively,” says Ralph Ferraro, president, Retirement Plan Services, at LFG. “Our data reveals significant positive trends such as young professionals, ages 25 to 35, saving 65% more after engaging with RCs, and newer employees doubling contributions after engaging with the RCs.
“The RCs provide personalized analyses of the impact of higher savings, paycheck adjustments and balancing financial priorities.”
LFG research indicates a shift in perspectives and confidence levels of retirement plan participants over the past five years. “COVID-19 prompted employees to reevaluate their lives,” says Ferraro. Benefits plan participants who said they were contemplating their ideal retirement vision rose from 77% in 2019 to 85% in 2023. Those thinking about it extensively rose from 34% in 2019 to 43% in 2023.
At the same time, LFG research shows participants’ confidence in making retirement plan decisions fluctuated, declining from 52% in 2019 to 44% in 2021, then stabilizing at 46% in 2023. In the last two years, there was a decline in those expressing “high confidence” in their ability to accumulate enough savings, retire when they want and have sufficient income during retirement—core components of retirement readiness.
“This suggests an ongoing need for education, as confident decision makers tend to save more,” says Ferraro. “Economic conditions during this period may contribute to this decline in confidence,” he adds.
Beyond its strategy for achieving greater contributions to DC plans, LFG is among the companies that are well-positioned to benefit from greater acceptance by plan sponsors of in-plan annuities. LFG pioneered the launch of in-plan annuities in 2012 and has almost 60 years of experience offering out-of-plan annuities.
“We consider in-plan annuities to be crucial for participants, plan sponsors and the defined contribution industry,” says Ferraro. He cites a 2023 BlackRock “Read on Retirement” study showing that 93% of workplace savers express an interest in converting a portion of their account balance to guaranteed income. The study also found that 98% of plan sponsors feel responsible for helping participants generate and/or manage their income in retirement.
He notes that the Secure Act passed into law at the end of 2019 gave a significant boost to in-plan annuities acceptance by plan sponsors with its fiduciary safe harbor and portability provisions. The growth of recordkeepers, middleware solutions and ongoing product innovation have also helped, he says.
Industry-wide, acceptance of in-plan annuities has been slow. Some insurers in the benefits market say participants would find the guaranteed income stream concept to be too complex; others worry that participants would perceive the guaranteed income as too low when they compare it to a significant balance in their DC account.
But the idea of a guaranteed lifetime income product continues to intrigue benefits planners because studies show significant unease among retirees about outliving their assets in retirement.
LFG’s 2023 Consumer Sentiment Tracker research found that only 30% of U.S. retirees are “very confident” in their ability to manage their finances during retirement, and 62% wish they could go back in time and change the way they planned for retirement.
“Our interactions with plan fiduciaries and consultants reveal that many perceived obstacles to in-plan annuities are effectively addressed through education,” says Ferraro.
In 2023, LFG surveyed its retirement plan sponsors and found that 86% of them rated their overall satisfaction with their retirement plan to be in the top two categories on a five-point scale; in the large account market, 96% rated their satisfaction in the top-two categories.
LFG’s partnership with employee benefits brokers, consultants and advisors has been key to building strong relationships with plan sponsors, Ferraro says. “Our commitment to intermediaries includes dedicated key account teams, client engagement teams, and a focus on lower-than-average caseloads.”
Thomas A. McCoy, CLU, is an Indiana-based freelance insurance writer.