However, advisors report a growing trend in that more plan sponsors are interested in education for employees, especially as it relates to encouraging contributions to their retirement plan. Most recordkeepers are providing more educational resources, including new tools to measure retirement readiness by both accumulated assets as well as monthly income. If a smaller employer seems less than interested in education, ask how many employees are on target to retire on time by replacing at least 75 percent of their preretirement income at age 67.
Full-service recordkeepers usually have networks of education specialists who can conduct group meetings, often in tandem with an advisor, and even meet individually with plan participants. Some firms offer technology such as tablets for group meetings that allow participants to take action in real time, including signing up for their retirement plan, boosting contributions or reallocating assets.
Servicing Plans
Smaller employers, many of which have few resources to manage their employee benefits let alone their retirement plan, often place a premium on good service. Good service is defined by employers as an advisor who listens and responds to their needs, is available when needed, and is quick to provide solutions.
Regular plan reviews may be especially important to sponsors that work with an advisor. MassMutual’s research found near unanimity on this issue, with 95 percent of all plan sponsors saying that reviewing the plan and its performance were extremely or very important for good service.
Yet, there is a huge disconnect when it comes to plan reviews. Many sponsors place a high priority on satisfaction with the plan provider and investment performance while participation rates and retirement readiness fall lower on the priority list. It’s no small mistake.
Advisors should flip that dynamic by helping employers focus on savings, the effectiveness of education programs, and the ultimate metric: whether their employees are on target to be retirement ready. Participation in the plan is certainly important too. But if every employee participates yet each saves only 1 percent of his or her salary, it may be ineffective as no one will ever be prepared to retire.
Fiduciary Foresight
Perhaps the biggest challenge of all for many employers—especially smaller employers—is to understand their fiduciary obligations. Only one in two employers with $5 million to $25 million in retirement assets understood that they and their advisor are fiduciaries and only 32 percent of those with less than $5 million in assets understood, MassMutual’s research shows.
With the Department of Labor’s proposed fiduciary rule in a state of flux, different advisory firms are taking different approaches in addressing fiduciary issues. However, several firms and recordkeepers have introduced fiduciary support services, including 3(21) and 3(38) programs that provide investment selection and monitoring, to assist employers in meeting their fiduciary responsibilities. A 3(21) program allows sponsors greater discretion over fund selection while a 3(38) service automatically updates funds to ensure compliance.