At the core of our business wealth services is retirement plans. Today, we want to put out some thoughts on two key aspects:
- How to make sure the benefit is appreciated (beyond just expected) and,
- how to economize your teams efforts to free them up for more important tasks.
Benefit appreciation is of course primarily driven by design features (matching, vesting) and investment options. These have to be reviewed and benchmarked regularly to make sure you stay competitive. More importantly is making sure the plan design is geared to attracting personnel in your key areas, whether that be truck drivers, the customer service desk or management. Whatever the case, there are ways to make sure your plan is targeting the most important groups, including yourself.
We are also still seeing too many plans using expensive share classes either unknowingly or to help cover the cost of the plan. The first is easy to fix. The latter requires some debate. We fully appreciate the importance of cost management to business success. But many sponsors don’t weigh that against the negatives; reduced performance (usually in the largest accounts that are probably the most important and/or most loyal employees), loss of tax benefits by paying costs directly, fiduciary exposure to ERISA and DOL guidance on plan expenses and maybe even negative feelings circulating amongst participants – the exact opposite of the desired outcome.
On the efficiency front, there are a lot of new opportunities that are just breaking through plan sponsor consciousness. Secure 2.0 is part of the reason.
This act expanded the Multi-Employer plan rules to allow unrelated companies to use multi-employer plans. That means that you don’t have to be in the same industry or sector to join a pooled plan structure (PEP). And the beauty of the pooled plan structure is the audit and the 5500 filing is the pooled structures responsibility, not yours. Releasing your HR and finance department from the time and effort required for these two items alone is worth the exploration of the PEP option. On top of that, you also eliminate the cost of the audit, no small expense.
Embedded in the pooled structure, is the concept of the “named fiduciary.” You may have already had exposure to the 3(21) or 3(38) Investment Fiduciary. They take over responsibility for the investments of a plan. The 3(16) is the Administrative Fiduciary who takes over responsibility for plan administration, like participant notices, the 5500 prep and signing, loan admin, etc. The pooled concept includes all of these. But a plan sponsor can also hire a 402(a) fiduciary to take over all these responsibilities for the plan. This is probably a more expensive alternative to the PEP but could make sense for certain situations where more customization or control are required.
In either case, the bottom line is you are removing significant responsibility from your staff so they can focus on the core issues that really affect your value.
If you would like to explore any of these options without cost or obligation, our team offers the following:
- Benchmarking analysis of design, cost and services
- Sector competitive analysis
- Investment analysis
- Plan design consultation
Please reach out to us to discuss any of these issues at your convenience.