Remote work was a growing trend even before the COVID-19 pandemic made it a necessity for many companies to remain operational. Prior to the pandemic, about 4 percent of the population worked remotely, a figure that ballooned to about 42 percent of the U.S. labor force during the pandemic. While these numbers are expected to recede somewhat as office buildings re-open, remote work is likely to remain at about 22 percent through 2025.

This dynamic creates challenges for human resources staff, particularly when it comes to helping employees save for retirement, according to new research from Morningstar titled “Out of Sight, but Not Out of Mind: Helping Remote Workers with Retirement Management Accounts.”

Participants invest differently if they are remote workers

The dramatic upswing in remote employees during the pandemic prompted Morningstar to study usage patterns among 115,657 participants in 39 401(k) plans and analyze the similarities and differences among remote and local employees.

Overall, the analysis found remote workers tended to be older and have higher salaries, balances, and deferral rates. The research further suggests remote workers invest differently in retirement plans than their local counterparts, said Morningstar.

Notably, remote workers were about 7.4 percent less likely to use the plan default investment available with their plan, and 1.3 percent more likely to use managed accounts. This can be explained in part by the demographics of remote workers — who tend to have higher incomes and are therefore less likely to use the default investment. However, the pattern persists when controlled for demographics, said Morningstar.

Because of this, defined-contribution plan managers may want to consider offering managed accounts or similar advice options if they are expecting a portion of their workforce to remain remote, especially because they typically do not add costs to the plan, said Morningstar.

Engaging remote workers in retirement plan saving

The increase in remote work creates other challenges with offering benefits, including expanding education and communication beyond home office presentations and group meetings traditionally held in the office without relying too heavily on video conference calls like Zoom, which can lead to a fatigue phenomenon.

Engaging remote workers in the process is likely to become more difficult, and many employees may be looking for personalized advice, Morningstar said.

Retirement managed accounts, or Robo advisors, which are offered by most recordkeepers, can help overcome these challenges by providing guidance on optimal portfolio risk levels, fund allocations, saving recommendations, and retirement age recommendations, along with ancillary services such as information on when to claim Social Security retirement benefits.

While the popularity of such services has been gaining traction in recent years, only about half of the plans currently offer them, said Morningstar.

Considering managed accounts for some employees

Although the use of managed accounts is typically low when offered in opt-in scenarios, there is evidence that those who do use managed accounts tend to save more for retirement and have more efficient portfolios, according to the report.

Some companies are offering managed accounts as part of default investments in a dynamic default structure, in which some participants default into a target-date fund and others default into managed accounts, said Morningstar. Older workers, for example, might be segmented into managed accounts while younger workers would default into target-date funds.

Kristen Beckman is a freelance writer based in Colorado. She previously was a writer and editor for ALM’s Retirement Advisor magazine and LifeHealthPro online channel. She also was a reporter for Business Insurance magazine covering workers compensation topics. Kristen graduated from the University of Missouri with a degree in journalism.