Plan sponsors in higher education
Building a Better Retirement: Higher education
Higher ed employers offer some of the best retirement plans. But by their own admission, they can do even better at explaining the benefits to employees, according to TIAA’s inaugural survey of 500 plan sponsor decision-makers, including 126 C-suite higher ed leaders.
Ahead of the curve.
Higher education has a lot on its plate, managing declining enrollment, funding reductions and other headwinds. A bright spot is the robust retirement plans many have in place, which provide a solid foundation as institutions consider additional improvements. Managing a retirement plan is complex for all employers, but higher ed sponsors enjoy distinct advantages.
For decades, many higher ed defined contribution (DC) plans have offered annuities, helping employees convert a portion of savings into guaranteed lifetime income in retirement. In contrast, the broader DC world is just now realizing the need to add income features to plans—changes that can be slow to implement. And yet, while higher ed sponsors are well ahead in offering annuities, they struggle to articulate how they work and what they deliver, which may be preventing more widespread participant uptake. TIAA's survey found higher ed employers are open to fresh ideas but may be underappreciating one of their most tenured plan features.
Designing for a disparate workforce.
Higher education human resources and finance leaders need to consider the needs of a wide range of participants— from facilities employees to more highly compensated faculty and administrators—while ensuring their plans remain competitive with peer institutions. Not only is there stiff competition to attract and retain staff, but leaders also have to consider tenured faculty working well beyond the typical retirement age and high turnover in adjunct faculty. With a deep bench of long-tenured employees, higher ed sponsors are much more likely to focus on helping employees not just save, but manage their savings through retirement.
53% of higher ed employers prioritize helping employees prepare for and manage through retirement, compared to 32% of all respondents.
And with a strong focus on recruitment and retention, they’re much likelier to offer a full suite of plan features, including some of the newest ones allowed by SECURE 2.0 Act of 2022, a law intending to help Americans save for retirement more easily. These features include emergency savings (54% vs. 39% for all sponsors) and a student loan repayment match (41% vs. 26%). At the same time, higher ed lags all sponsors in offering an employer match (62% vs. 78%) and Roth contributions (46% vs. 58%), although a significant number of sponsors indicate they plan to add these features. Higher education employers also say they plan to upgrade their DC plans over the next two years in ways that will put them to be on par or ahead of all employers on nearly every aspect of plan design.
An overlooked gem: retirement income.
Higher education is already at the forefront of the biggest trend in retirement plan design—in-plan annuities—but many don’t realize it. Most other employers are only starting to discuss how to help employees turn savings into retirement income—only 26% offer an in-plan annuity compared to 49% in higher education. Higher ed employers also feel more confident in their ability to convey annuities’ detailed benefits and risks than other employers (63% vs. 48%). However, like other sponsors, they find it difficult to explain their value, with 37% of both groups of respondents saying they can articulate why annuities matter.
These findings point to a need for more education. Annuities have been part of higher ed plans for years—long before most of their current leaders even gave retirement a thought. Helping higher ed employers build greater annuity fluency would help them educate staff about income features already at their disposal.
Plan changes are a lighter lift in higher ed.
For higher ed sponsors who don’t yet offer annuities, there’s appetite to do so, with 31% planning to add them to retirement plans in the next two years, in line with other sponsors. Notably, higher ed employers seem better able to implement changes, with 62% saying they don’t face any barriers to plan changes, compared with 36% for all employers. As one sponsor put it, “We have one leadership team that’s the final decision-maker with respect to changes. We don’t have to get multiple layers of approval.” Higher ed employers, like
We have one leadership team that’s the final decision-maker with respect to changes. We don’t have to get multiple layers of approval.
Gonzaga and other sponsors say offering an annuity in the default helps bring their employees a step closer to better retirements—with a portfolio that gets them to retirement and sees them securely through it.
Building a Better Retirement Survey.
TIAA’s inaugural survey of retirement plan sponsors.
TIAA’s Building a Better Retirement survey consulted 500 C-suite leaders in finance and human resources across 17 industries (including 126 higher ed leaders) to elicit their thoughts on how their current retirement plans are working, what they’d like to do next and what’s standing in their way.
These decision-makers responded to our online survey between June and August 2024. Some gave follow-up interviews through November 2024, facilitating an even better understanding of how they’re thinking and the trends they’re driving.
This blind survey was conducted with Greenwald Research. Respondents did not know TIAA developed and sponsored it.
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“Building a Better Retirement” was conducted by Greenwald Research on behalf of TIAA.
Annuity account options are available through contracts. These contracts are designed for retirement or other long-term goals, and offer a variety of income options, including lifetime income. Payments from the variable annuity accounts are not guaranteed and will rise or fall based on investment performance. Any guarantees are backed by the claims-paying ability of the issuing company.
This material is for informational or educational purposes only and is not fiduciary investment advice, a securities investment strategy or an insurance product recommendation. This material does not consider an individual’s own objectives or circumstances which should be the basis of any investment decision.