Remote work was a growing trend even before the COVID-19
pandemic made it a necessity for many companies to remain operational. Prior to
the pandemic, about 4 percent of the population worked remotely, a figure that
ballooned to about 42 percent of the U.S. labor force during the pandemic.
While these numbers are expected to recede somewhat as office buildings
re-open, remote work is likely to remain at about 22 percent through 2025.
This dynamic creates challenges for human resources staff,
particularly when it comes to helping employees save for retirement, according
to new research from Morningstar titled “Out of Sight, but Not Out of Mind:
Helping Remote Workers with Retirement Management Accounts.”
Participants invest differently if they are remote workers
The dramatic upswing in remote employees during the pandemic
prompted Morningstar to study usage patterns among 115,657 participants in 39
401(k) plans and analyze the similarities and differences among remote and
Overall, the analysis found remote workers tended to be
older and have higher salaries, balances and deferral rates. The research
further suggests remote workers invest differently in retirement plans than
their local counterparts, said Morningstar.
Notably, remote workers were about 7.4 percent less likely
to use the plan default investment available with their plan, and 1.3 percent
more likely to use managed accounts. This can be explained in part by the
demographics of remote workers — who tend to have higher incomes and are
therefore less likely to use the default investment. However, the pattern
persists when controlled for demographics, said Morningstar.
Because of this, defined-contribution plan managers may want
to consider offering managed accounts or similar advice options if they are
expecting a portion of their workforce to remain remote, especially because
they typically do not add costs to the plan, said Morningstar.
Engaging remote workers in retirement plan saving
The increase in remote work creates other challenges with
offering benefits, including expanding education and communication beyond home
office presentations and group meetings traditionally held in the office
without relying too heavily on video conference calls like Zoom, which can lead
to a fatigue phenomenon.
Engaging remote workers in the process is likely to become
more difficult, and many employees may be looking for personalized advice,
Retirement managed accounts, or robo advisors, which are
offered by most recordkeepers, can help overcome these challenges by providing
guidance on optimal portfolio risk levels, fund allocations, saving
recommendations and retirement age recommendations, along with ancillary
services such as information on when to claim Social Security retirement benefits.
While the popularity of such services has been gaining
traction in recent years, only about half of plans currently offer them, said
Considering managed accounts for some employees
Although use of managed accounts is typically low when
offered in opt-in scenarios, there is evidence that those who do use managed
accounts tend to save more for retirement and have more efficient portfolios,
according to the report.
Some companies are offering managed accounts as part of
default investments in a dynamic default structure, in which some participants
default into a target-date fund and others default into managed accounts, said
Morningstar. Older workers, for example might be segmented into managed
accounts while younger workers would default into target-date funds.
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