How Should Your Benefit Plan Respond?

As the year draws to a close, it’s a good time to reassess your benefit plan strategy. Shifts in workforce demographics, evolving investment behaviors, and changing participation rates should all play a role in how your plan is designed and managed. In this article, we’ll look at two key questions:

• What workforce trends could affect your benefit plans?
• What are some steps you can take to address those changes?

Trend #1: Participants are getting older

People are living longer. The Congressional Budget Office (CBO) estimates that the average lifespan will increase from 78.7 in 2024 to 82.2 years by 2054.[1] Combined with a slowing population growth, this can only mean one thing for benefit plans: participants are, on average, getting older.

What can you do to support older participants?

We encourage you to educate your participants about their options. The most important education topic might be catch-up contributions.

Per US law, all retirement plans have annual contribution limits, which means that there’s a maximum amount you can put into your account each year. Catch-up contributions are additional amounts that participants age 50+ can make on top of the standard limit. They exist to help older adults boost their savings as they approach retirement, which can be a great solution for those who started saving for retirement later in life. Catch-up contributions are permitted for both employer-sponsored plans and for IRAs. But the law recently boosted catch-up contributions for participants in employer-sponsored plans in certain age groups.

Beginning January 1, 2025, the maximum catch-up contribution for someone with a 401(k), 403(b), SARSEP, or 457(b) was increased by 50% for individuals who attained age 60, 61, 62, or 63 during the year. For these participants, the catch-up limit rose from $7,500 to $11,250 in 2025.

Employer-sponsored retirement plans are not required to adopt this additional 50% catch-up contribution, but it’s an option for businesses that want to offer another chance for their workers to grow their retirement savings.

So… what should you do with this information?

First, you need to decide if you want your plan to offer additional catch-up contributions.

Second, you should educate your employees about contribution limits. The general rule of thumb is that an individual can put money into one (or more) employer-sponsored retirement plans, up to the maximum contribution limit, and to one (or more) IRAs, up to the maximum contribution limit. IRA contribution limits are different than those for employer-sponsored plans.*Employees with 15+ years of service with the same 403(b) may be able to contribute an additional $3,000 per year, regardless of age, but only if the plan allows for it.

Third, ensure your plan document addresses whether you’re offering the expanded catch-up contribution limits, and that you’re accurately tracking age, income, and contribution levels to maintain compliance.

Change #2: Employees are investing at a younger age

A 2024 TIAA report found that 20% of Gen Z employees (i.e., those under age 30) are already saving for retirement. While this figure might sound low, it’s actually higher than the percentage of Millennials who were saving for retirement when they first entered the workforce.[2]

What’s causing this increase in participation among the younger generations?

The answer is clear: Automatic enrollment.

A 2023 Vanguard report shows that only 30% of workers between the ages of 18 and 24 participated in an employer-sponsored retirement plan in 2006, but this number rose to 62% for that same age group by the year 2021. But among plans with automatic enrollment, participation rates rose to a whopping 88%. This shows just how powerful automatic enrollment plan features can be.

Per the SECURE Act 2.0, automatic enrollment features are required beginning this year for plans established on or after December 29, 2022. For these plans, unless an employee opts out, plans should enroll employees at an initial contribution rate of no less than 3% of the employee’s pay, and should automatically increase that rate by 1% each year until it reaches at least 10% but not more than 15%.

If your plan was established before December 29, 2022, you aren’t required to implement an automatic enrollment feature. But it’s one you might want to consider because auto enrollment features can:

• Boost participation rates: With more participation, your plan’s assets grow, which can help you gain access to lower-cost fund options, which will ultimately improve outcome and choice for all participants.
• Make it easier to pass nondiscrimination tests: Broader participation ensures that the plan doesn’t show favoritism to highly compensated employees.
• Support employees: As an employer, you may like being able to help your employees build financial security for later in life. With any luck, this can boost job satisfaction and improve employee retention.

Change #3: Participants want decisions to be easy

A 2024 Nationwide survey on participant sentiment revealed that 62% of plan participants find it “confusing” to manage their retirement plan. You can help solve this problem with better education (on retirement planning, investments, plan features, tax implications, etc.), but you may also be able to solve the problem with better technology.

Retirement plan technologies are only getting better. These digital tools and platforms can help manage plan administration, track contributions, and give participants easy access to their account information. Good technology can also:

• Give employees on-demand education, giving them greater control over their finances and making them more satisfied with their benefits package.
• Give you, as the plan administrator, greater insights into what employees want or what they want to learn more about.
• Disseminate key information to participants, like when investment options change or if a new feature is being rolled out.

There are many different retirement solutions on the market that you can employ or add to your plan. We encourage you to explore what’s out there. Even if you aren’t ready to adopt new technology now, it’s good to think about how technology can make your job easier as your plan grows. You’ll be aware of the options, and you’ll be prepared to make a change when the time is right.

Future proof your retirement plan

Population trends are always in flux, and your annual audit will only uncover so much. It’s important for you to perform a proactive review of your plan to ensure it continues to meet the changing needs of your employees. Reach out today if you have any questions about your plan.

[1] https://www.cbo.gov/publication/59899

[2]https://www.nytimes.com/2025/06/28/business/retirement/gen-z-retirement-savings.html