Retirement plans are an essential – but if administrated creatively, they can also be a major asset to firms.
The market volatility caused by the pandemic is likely here to stay for the foreseeable future, and it has created additional stress on employees. For plan sponsors, this means that areas of focus have shifted as they navigate a changing world. We dive into three areas where plans are likely to need to put resources going forward.
Three Top Areas of Focus
Creating an Employee Wellness Program
Stress free employees are more productive employees
Ensuring that your employees make financial choices that will lead to successful retirements is critical. Employees that aren’t experiencing financial stress are more productive – and a great plan can be a good recruiting tool.
There are four key elements of a solid Employee Wellness Program:
Segment education and messaging by both age and demographics (income and job function). Different segments have different needs and are at different points in their journey.
Address the topics that are the biggest stresses for employees: saving money, getting out of debt, building towards financial freedom
Craft the message in a consumable way – simple, defined choices with clear outcomes
Be flexible in your media – using online sources, emails, short training videos, live streams.
Reducing Fiduciary Liability
Did you know that as a plan sponsor, you can be personally liable for not upholding your fiduciary duties? Don’t let mismanagement curtail your own financial assets.
Fiduciary liability is broad and there is no shield for personal assets. The business and personal assets of decision-makers are fair game in a lawsuit or an enforcement action.
ERISA provides for 3 types of outsourcing of different levels of liability:
Section 3(21), also called “Co-Fiduciary” means you can hire someone to provide investment advice and rely on that information when making decisions for the plan.
Section 3(38) allows transferring of fiduciary duty onto an investment manager.
Section 3(16) provides for naming a Plan Administrator with the fiduciary duty to be responsible for all administrative functions.
The ERISA regulatory landscape has become extremely complex. It now requires specialization – whether in-house or outsourced – to keep up with the duties and requirements for plan sponsors.
Benchmarking
Working with a retirement plan specialist who benchmarks all aspects of your retirement plan can reduce liability and modernize your plan.
The Department of Labor requires benchmarking every three years. But the best reason to do it is to ensure that plan participants are getting a plan with the right set of choices and benefits, at the right price, and that plan sponsors are securing the services they need to keep things running smoothly. You don’t necessarily have to move your plan – taking it out to bid can provide a strong negotiating stance with your current service providers.
The bull market from 2009-2019 increased plan balances through investment returns. These larger balances put plans in a stronger negotiating position.
In the current market, with increased volatility, it’s even more important to pay attention to fees and investment choices.
As companies and their related plans grow and change, the level of complexity changes as well. Benchmarking can help reveal whether it may be time to increase the level of service providers, or appointing a different Plan Administrator. These services might not be as expensive as you think.
At Friendly 401k. we take a holistic approach to evaluate your entire retirement plan. Not only do we look at the mutual funds available but we also perform a cross-comparison on the underlying recordkeeper to ensure your fees are aligned with national standards. Often times, we are able to lower your associated cost without making major changes.
Additionally, our emphasis on providing financial wellness to your most important asset, your talent force, can be critical to helping them find stability in their financial lives.