APPLICABILITY
Indicator metrics apply to all employees (see definition in General Clarifications). For organizations pursuing Level 2 and above, retirement benefits must be provided on a prorated basis to part-time employees who work at least 20 hours per week.
AUTO-ENROLLMENT
Auto-enrollment refers to a policy through which employees are automatically enrolled in a program unless they take action to decline enrollment. The intent for purposes of this Indicator is to remove barriers to employees’ enrollment in the deferred compensation offerings and establish enrollment as the default condition.
While there are advantages and disadvantages to this practice, research shows that the benefits to employees outweigh the drawbacks. Over 90% of employees participate in a 401(k) plan with an automatic enrollment feature, compared to only 28% when one is not in place.74 Furthermore, beginning in 2025, employers in the U.S. with new 401(k) and 403(b) plans must automatically enroll employees as soon as they are eligible (with some exceptions, such as small businesses with fewer than 10 employees and new businesses).75 Organizations should consult relevant local legislation to ensure they are adhering to all requirements at the time of submission.
Employees may elect to decline enrolling in a retirement plan for various reasons; thus, organizations that automatically enroll employees in retirement plans should also provide clear and easily accessible information on how to opt out or enroll at a later date.
Additionally, auto-enrollment is not a substitute for financial planning, education, and goal-setting. Providing financial education and encouraging employee agency facilitates individuals to make informed decisions that are best for their circumstances and goals.
DEFINED BENEFIT PLAN
For the purposes of Just, a defined benefit plan, also known as a traditional pension plan, provides a fixed, pre-established benefit for employees at retirement that is primarily funded by the employer.
In Australia and New Zealand, superannuation funds may qualify for consideration for Level 4 performance as a form of defined benefit pension plan.
EMPLOYER CONTRIBUTION
Employer contributions to employee retirement plans may have a waiting period of no more than six months from the first day of employment.
FINANCIAL ADVISING/EDUCATION SERVICES
For the purposes of this Indicator, financial advising/education services must be accessible at no additional cost to the employee in order to count toward the Indicator metrics. To ensure employees receive accurate and trustworthy guidance, advising/services must be provided by a trained professional/expert. Additionally, any financial consultations should remain confidential to protect employee privacy and encourage open participation. Living Future encourages organizations to engage with an external vendor (e.g., retirement plan administrator) where possible.
Examples of these services could include, but are not limited to:
- Support for budgeting and money management through the organization’s EAP;
- Retirement consultations;
- Financial literacy courses;
- Personal finance webinars; and
- Tools for long-term saving.
IMMEDIATE ELIGIBILITY
For purposes of Just, immediate eligibility means that benefit accrual begins within 45 days of the first day of employment.
INVESTMENT OPTIONS
Living Future encourages organizations to provide options for employees to elect retirement plans that invest funds into companies that align with their personal values. Examples include options for environmental, social, and governance (ESG) investing or options that prioritize gender diversity, climate change, or anti-violence.76
NATIONAL RETIREMENT PROVISIONS OUTSIDE OF THE U.S.
The threshold percentages for each performance level remain the same, whether or not certain contribution percentages are stipulated by national law. Where pre-determined by government plans, auto-enrollment and immediate eligibility requirements may be waived, and organizations may be eligible to achieve Level 4 without auto-escalation if the total contribution defined in the plan is 15% or more. In countries where the government provides employee retirement or pension benefits, these may be included in the percentage of the organization’s coverage. Living Future recognizes there is wide variation in how countries choose to approach retirement provisions and welcomes conversation from international organizations on how best to adapt Indicator metrics.
PROFIT SHARING
Organizations with a defined profit sharing plan may be eligible for the Defined Benefit Plan alternative compliance path if they can demonstrate they fulfill the defined contribution plan components of the general compliance path. If you are uncertain if your organization’s benefit plan is eligible for the alternative compliance pathway, please contact the Just team.
RETIREMENT POLICY
If an organization with part-time employees is pursuing Level 2 or above, the Retirement policy must specify that the benefits are accessible regardless of employee type (i.e., full-time or part-time).
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74 Clark, J. & Young, J.. (2021, February). Automatic Enrollment: The Power of the Default. Vanguard Research. Retrieved January 24, 2023, from https://institutional.vanguard.com/iam/pdf/ISGAE_022020.pdf.
75 Sherman, E. (2023, February 28). You Could Soon Be Automatically Enrolled in a 401(k) Plan. U.S. News & World Report. Retrieved October 17, 2023, from https://money.usnews.com/money/retirement/401ks/articles/you-could-soon-be-automatically-enrolled-in-a-401k-plan.
76 Hayes, M. (2022, March 24). What to Know About Socially Responsible Investing for Retirement. Experian. Retrieved October 18, 2023, from https://www.experian.com/blogs/ask-experian/what-to-know-about-socially-responsible-investing-for-retirement.
