Pension trends that can help sponsors connect with employees

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Increased popularity of financial wellness programs, unqualified plans to attract more key talent, and managed accounts with personalized portfolios – not to mention the continued consolidation of record keeping companies – there is a lot going on right now. pension industry, said David Graver, vice president of pension services at Fort Pitt Capital Group LLC in Pittsburgh, Pennsylvania. We caught up with Graver to get his perspective on the impact of these trends on plan sponsors and their members.

Katie Kuehner-Hébert: Tell me about the impacts of the latest trends.

David Graver: In 2020 there were many changes to pension plans as people needed access to their money. The CARES Act relaxed restrictions on taking out loans against a plan, as well as on distributions. These are no longer in place, but because of them, COVID has brought to light that there will still be many plan members facing financial well-being issues.

David Graver, AIF, Vice President, Pension Services, Fort Pitt Capital Group LLC

As such, plan sponsors are now exploring how they can help their employees solve these issues, not just looking at what they are doing with their retirement plan, but how they can support their financial stability. employees as a whole.

As a result, financial well-being has come to the fore as plan sponsors seek to help employees feel more comfortable. The point is, if employees aren’t sitting at work paying their bills, many are still concerned about their finances, reducing productivity at work.

Archivists have fantastic wellness programs that participants can access to accomplish a lot of things – budget, tackle debt, aggregate multiple accounts to see if they’re on track for retirement.

Some archivists have built health savings accounts into their 401 (k) plans and some are even exploring student loan assistance options within the plans.

Student loan repayment programs outside of pension plans, many companies are currently looking at a trend. With most college graduates entering the workforce with a mountain of debt, the programs companies offer to help reduce that balance can be a differentiator when trying to attract young talent and contribute to well- be overall financial staff.

Another trend is the consolidation of archiving companies. For example, Empower Retirement recently acquired the pension business of MassMutual and Prudential, and Principal Financial Group recently completed the integration of Wells Fargo’s institutional retirement business.

While these deals reduce the number of options advisors use to determine what is best for their clients, consolidation isn’t necessarily a bad thing. This has helped the pricing, which is now a very competitive race to the bottom of fees on both the fund administration side and the record keeping side.

However, advisors should always consider whether their clients really want to participate in the plans that have acquired theirs. Advisors should use benchmarks to make sure new plans are right for their clients and whether service levels have dropped when clients are onboarded to new plans.

A third trend is the very sharp increase in the non-qualifying plans offer as a means of attracting and retaining key employees. Offering deferred compensation plans is a way not only to keep these key, highly paid employees, but also to attract new ones. These have really grown in popularity this year and we expect an even bigger uptick in adoption of these plans in 2022.

What’s your advice on the best way to communicate with employees?

Plan sponsors should ensure that they take advantage of their accountant’s communication tools to educate and encourage their employees to actively participate in the plan. Whether it’s mail or email campaigns focused on a specific topic or demographic, webinar series, in-person presentations – businesses and their employees are investing millions of dollars in these plans, they need to leverage. of all the tools at their disposal.

The majority of 401 (k) and 403 (b) plans have an advisor hired by the plan sponsor. Plan sponsors should ensure that their advisors are receiving their paycheck by conducting employee training programs and wellness initiatives. Investment advisers really should be the quarterback of the entire pension plan relationship, including employee training.

How can businesses improve the employee registration process?

The easiest way to simplify and improve overall plan participation is to choose automatic enrollment. This is a nice feature – once an employee becomes eligible for the 401 (k) plan, they automatically join at a fixed rate, for example 3%, which the employer can then match if the plan contains this provision.

Another great thing about this is that the employee should opt out – not sign up, which means the block rate is really, really high. Once automatically enrolled, statistics show that between 80 and 90% of employees end up staying with the plan. If employees were to register, the percentage probably wouldn’t be that high.

There is also an automatic increase, in which each year an employee’s contribution rate increases automatically, with a cap, usually 10%. Combining these two features can really improve participation rates, which overall contributes to the health of the plan and, most importantly, helps employees save more for retirement.

What else do you see?

One investment offering that has received more attention lately is that of managed accounts. Since the early 2000s, maturity funds have been very popular with plans, constituting the largest investment portfolio. For many people, target date funds are appropriate and do exactly what they’re supposed to do. But this logic has changed a bit recently. Target date funds have typically only considered an individual’s target age range and retirement data, but not risk tolerance or whether the individual will have other sources of income or of assets. Most registrars now have managed account options where custom portfolios are used, each tailored for that specific plan member.

Managed accounts are becoming more and more popular, but the caveat is that individuals often pay additional fees for them. Members can choose to set up their own pension plan account or rely on the advice of an outside advisor that they use personally.

Additionally, as mentioned earlier, most 401 (k) and 403 (b) plans have a plan advisor hired by the plan sponsor. The Plan Advisor normally visits clients’ workplaces on a regular basis and can help people manage their account assignments. If a member works regularly with their personal advisor or plan advisor, managed accounts may not be suitable for them.


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