We all talk about it. We all mean to do it. But redesigning your retirement plan with the needs of women and minorities as a priority is something that takes things most of us just do not have in our quiver of resources - time, money for the match or employer contribution, staff and the data to know what the issue really is for your population so you can make a difference.
The recent financial crisis certainly makes even those that thought they were well-prepared for retirement pause to reconsider. With many investors questioning standard investing guidelines, and baby boomers (hopefully) standing on the brink of retirement, who knows what to do anymore? How many CFOs are wondering what to do with their growing pension liabilities and giving thought as to why the company is taking risks by providing retirement benefits at all?
In 2010, I was the chair of a topic paper for the Department of Labor ERISA Advisory Council on the disparities for women and minorities in retirement security. (My comments here are my opinion only. The full report can be accessed on the DOL's website at www.dol.gov/ebsa/publications/2010ACreport3.html.)
Overlooked area of concern
An overlooked and much needed area of concern is the plight of women and minorities, and their ability to retire. It makes a difference economically because if they cannot support themselves in retirement, their families or the government likely will be footing the majority of the bill. It makes a difference to employers because it has a significant impact on workforce planning.
Disparities do indeed exist due to many factors, and most of these factors are beyond the scope of employer-sponsored 401(k) plans. But we should give it our best shot (remember your quiver) to do what we can to make our plans the best designs possible for our employee populations and utilize the best practices available.
Factors driving the disparities include:
* Four out of 10 women rely on Social Security as their only source of income.
* Many women and minorities are employed in industries that do not traditionally offer benefits.
* Many women move in and out of the workforce to care for family, which can reduce their earnings capabilities and the number of years to accumulate savings.
* Women generally have longer life spans; mortality varies by gender, socio-economic status and ethnicity.
* Minority women tend to have even lower savings than white women.
* Minorities generally tend to have lower participation rates and savings rates than whites.
* The decline of the defined benefit system negatively affects many lower-income individuals, regardless of race or gender.
* Leakage from plans compounds the issue of low account balances and no emergency reserves.
* Cultural and communications issues.
* Lack of understanding of financial wellness and readiness.
* The "unbanked" - how do you understand the concept of saving and a 401(k) plan if you've never had a checking account?
Opportunities to help
For society in general, and employers in particular, there are several opportunities to help women and minorities:
* Creating targeted communications that are culturally appropriate.
* Advocating for easier and simpler regulatory disclosures.
* Beginning financial education in early childhood.
* Crafting summary plan documents that are easy to understand.
* Implementing auto-enrollment, a proven tool as a means for a first step toward saving.
* Reducing opportunities for loans within your plan to address leakage.
* Maintaining accurate data that helps you understand your population better - who they are and what they need - ethnicity, language preference, etc.
* Sharing data on an anonymous basis with organizations that conduct studies on this topic.
These disparities add complexity to the many challenges facing the retirement landscape today. You can play an active role in making a difference by identifying and acting on your opportunities.
Contributing Editor Mary Nell Billings is director of benefits, Americas, for Hilton Worldwide, headquartered in McLean, Va. She holds both a BBA and MBA in accounting and finance from the University of Memphis. She can be reached at Mary.Nell.Billings@hilton.com.
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