By Mark Olsen, Managing Director at PlanPILOT
It’s no secret that the advent of remote work has forced a wide range of challenges and benefits to employers and employees. Both have realized the benefits of cost savings and flexibility and are also making adjustments to accommodate each other’s goals of productivity and accountability in this new environment. And studies indicate this trend will likely continue.
One area that may be lacking appropriate attention thus far is the effect of this new paradigm on retirement plans and employee saving behavior. Studies by investment companies such as Morningstar indicate that physical absence from the office environment may be altering how employees participate in their employer-sponsored plan. The conclusions suggest that plan sponsors take measures to address and take advantage of these changes by adapting their retirement plans to accommodate this new mode of employment to foster goodwill and employee satisfaction of remote workers.
Reallocation of Cost Savings Toward Retirement
While working remotely, employees may be enjoying savings on commuting expenses, the lower need for professional attire, and not paying for lunches out. According to surveys by FlexJobs, remote workers have saved as much as $6,000 annually by working from home, and recent statistics by the U.S. Career Institute indicate savings could actually average over $10,000 per year. These savings may be redirected toward retirement plan deferrals. In addition, since the amounts saved through remote work are in after-tax dollars, the actual pre-tax amounts that could be directed toward retirement savings could be significantly more.
Employers can actively encourage employees to use these savings to increase their retirement contributions. One approach is through targeted financial education programs that emphasize how small adjustments, such as reallocating savings from reduced commuting expenses, can significantly boost retirement savings over time. Employers can also influence behavior by illustrating how saving an additional $50-$100 a month can grow over the course of a career, using personalized examples in financial wellness workshops or interactive retirement calculators.
Additionally, employers can highlight these opportunities in benefit enrollment communications or through dedicated sessions with financial advisors who explain the impact of contributing extra savings to retirement accounts. Incentivizing higher deferral rates, perhaps through additional employer matching, can further motivate employees to take advantage of the savings they’ve gained through remote work arrangements.
With lower workspace expenses, plan sponsors who have adopted the remote work culture may find themselves with extra cash flow to offer a higher employer match or profit-sharing in their retirement plans, as well as offering other employee benefits to attract better talent and retain high-value employees. Some plans may be upgraded to include educational features, professional advisor services, and other benefits.
Retirement Plans May Need to Adapt for the Remote Worker
One challenge faced by plan sponsors will be to ensure equal access to plan resources. Traditionally, participation and access required face-to-face interactions with administrators or HR, which may not be as available to remote employees, even with the availability of Zoom or FaceTime technology. Accommodations to these workers, such as virtual benefits education workshops and robust online platforms, may need to be implemented to be certain of equal access and to meet plan requirements. A side effect of implementing virtual access to resources or presentations (and a deterrent to remote employee participation) may be “Zoom fatigue,” where workers avoid or decline engaging in an additional virtual meeting that is not required by their job.
Reaching remote employees with plan information, access availability, and promoting participation may be another significant challenge. Along with the lack of normal office banter or casual communication, remote workers may feel less informed and connected to their retirement plan. This lack of connection may lead to lower enrollment and participation, especially for employee stock ownership plans (ESOPs). A MetLife open enrollment survey indicated that nearly half of remote workers had difficulty understanding their employee benefits, versus 29% of in-house colleagues with a similar issue.
Remote Workers May Invest Differently
Those who work outside their company offices are likely to be more independent in their behavior and thinking patterns. As such, their approach to their retirement account allocations and benefits may differ from their in-house colleagues. Reports indicate that remote participants may be less inclined to use default investments, such as target-date funds, and may be more interested in personalized service from plan financial advisors or prefer a wider menu of investment options or managed accounts.
It May Be Management Who Is WFH or WFA.
The demographics of remote workers play a key role in retirement saving patterns as well. 2024 statistics indicate that while 54% of junior-level employees work remotely, a full 64% of senior-level employees work at least part-time outside the office. In addition, the greater number of remote employees are found in the professional service and technology fields. Both of these groups tend to be higher-compensated and higher-educated, implying that benefits plans need to accommodate their retirement planning objectives and provide for increased retirement savings needs.
In sum, those companies with a significant remote employee population may be wise to review these effects and carefully consider how upgrading and adjusting their plans may result in greater employee satisfaction and favorable participation by remote workers.
Utilizing Professional Assistance
At PlanPILOT, our company is uniquely positioned to help you meet these objectives. If you’re ready to upgrade to a new standard for your benefit planning, reach out to us at (312) 973-4913 or send an email to mark.olsen@PlanPILOT.com to learn more about how we can customize our services and your plan to fit your unique needs.
About Mark
Mark Olsen is the managing director at PlanPILOT, an independent retirement plan consulting firm headquartered in Chicago. PlanPILOT delivers comprehensive retirement plan advisory services to 401(k), 403(b), and 457 plan sponsors. His specialties include plan governance, investment searches, investment monitoring, and plan oversight. Mark is recognized as a leader in the industry and speaks at national conferences, including those organized by Pensions & Investments, and CUPA-HR.